Moldova’s current account deficit (chart) widened by 54% year on year to $2.9bn in 2024, driven primarily by an 18% increase in the trade deficit, which reached $4.7bn, according to data published by the National Bank of Moldova.

This brought the current account-to-GDP ratio to 16% in 2024, up from 11% the previous year, continuing a trend of persistently high external imbalances for the country.

Despite the expanding deficit, Moldova’s gross external debt (GED) rose marginally by just $94mn to $10.2bn at the end of 2024. The GED-to-GDP ratio declined to 56.2% from 59.1% in 2023 and 66.6% in 2022.

Central bank reserves also increased, reaching $5.5bn by the end of 2024, suggesting that neither foreign borrowing nor reserve drawdowns were used to finance the shortfall.

Instead, the deficit has been covered by domestic actors, notably households and non-financial corporations. The “net acquisition of financial assets” account recorded net sales of $2.6bn in short-term financial assets in 2024, following $1.75bn in 2023. These figures reflect the liquidation of private sector reserves, particularly foreign currency holdings and other instruments, to offset the current account gap.

Foreign direct investment (FDI) has played a limited role, with net inflows of $244mn in 2024 and $342mn in 2023. Much of this consisted of reinvested earnings while new equity inflows turned negative amid increasing investor risk aversion.

Concurrently, remittances remained robust at $1.4bn in 2024, accounting for 7.7% of GDP, yet these flows are part of the current account and do not contribute to its financing.

Moldova’s current account deficit reached a peak of 17.3% of the GDP in 2022, following a costly geopolitical shift away from Russian energy imports. While the deficit remains in double digits, external debt accumulation has been modest, with only a $3bn increase over the past five years and a drop in the debt-to-GDP ratio of more than seven percentage points.

The sustainability of this financing method seen in the past two years is uncertain. Moldova’s borrowing capacity is constrained, primarily limited to concessional loans from international financial institutions. With private sector reserves being depleted, the country’s ability to maintain large deficits may soon reach its limits – it's only a matter of time.