Moldova’s trade deficit widened by as much as 22% y/y to $838mn, as reported by the statistics bureau, or by 11% y/y to €698mn expressed in the European currency, in the first quarter of 2021.

Exports increased by 5.6% y/y to €612mn but imports surged by 13.6% y/y to €1.55bn.

The deterioration of the country’s trade balance is significant and it comes on top of an already high (+12% y/y, expressed in euros) trade gap in the first quarter of 2020.

The trade gap in the rolling 12 months exceeded €2.6bn, one quarter of country’s GDP, though it has eased from €2.8bn as of March 2020. Although the trade balance has not deteriorated during the past year, its financing must have turned more precarious due to scarcer wage remittances and external financing. The current account balance will provide a more accurate picture. The pressures on the exchange rate have only recently surfaced, though.

The deterioration of Moldova’s trade balance in Q1 was caused to a large extent by the weak output in the farming sector: the exports of food and living animals contracted by 38% y/y to $121.3mn (out of total exports of $712.7mn) and this category of goods shifted from a surplus of $19mn to a deficit of $71mn.

Another notable development is the advance of the industrial goods in the country’s exports (and imports). Exports of machines and equipment soared by 42% y/y to over $200mn and the exports of chemical products by 70% both sectors contributing overall more than 11pp to the exports’ dynamics. The slump in the exports of food and living animals however, made a similar but negative contribution.

The rise of industrial exports has not helped the trade balance, but rather the opposite. The trade deficit in the two sectors has widened by 2% (chemicals) and 25% (machinery) respectively to a total of $355mn, or more than half of the total trade deficit ($690mn).