Republic of Moldova: Third Reviews Under the Extended Credit Facility and the Extended Fund Facility Arrangements, and Request for a Waiver for Nonobservance of Performance Criterion-Press Release; Staff Report; and Statement by the Executive Director

The Moldovan economy contracted sharply in 2022; a modest recovery is expected this year. Spillovers from Russia’s war in Ukraine, high inflation and depressed demand, and weaker agricultural production all contributed to contraction in 2022. Recovery this year is supported by a pick-up in domestic demand and better growth prospects of trading partners. Inflation has decelerated as the National Bank reacted proactively to contain second-round effects and anchor expectations. Fiscal indicators remained robust in 2022, reflecting higher revenues, grants, and continued budget under-execution. International reserves continue to provide adequate safeguards against shocks; well-capitalized and liquid banks have weathered the impact of the war. The outlook is subject to high uncertainty related to the war and energy security risks.