The current account (CA, chart) deficit narrowed by 10% y/y to $450mn in Q1 2024, driven by the 11% lower deficit in the trade with goods ($1.1bn) according to data published by the National Bank of Moldova.

The CA gap in 12 months to March 2024 thus reached $1.92bn or 11.4% of the GDP in the same period, down from 11.9% calculated in the 12-month period ending December 2023. The ratio has improved (narrowed) constantly since Q4 2022 when it reached the past decade’s maximum of 17.3% of GDP.

The net import of goods in the four quarters to March 2024 decreased by 13% y/y to $4.76bn.

Out of this, 32% was covered by the period’s remittances ($1.52bn, 7% down y/y) while foreign direct investments (FDI, $324mn) covered only 6.8%.

FDI covered 16.8% of the CA gap in the four quarters to the end of March 2024, compared to 20.8% calculated for the previous four-quarter period.

Speaking of the FDI in Moldova, a large part of it was formed by reinvested earnings in recent years — profits derived by FDI companies but not repatriated — which is quite unusual for a country at this stage of economic development when the stock of FDI is not particularly high. In the four quarters to March 2024, the reinvested earnings were $360mn. On the upside, the equity FDI has been much smaller compared to the reinvested earnings (roughly zero in four quarters to March 2024).

The stock of FDI in Moldova was $5.35bn at the end of March 2024, down from $5.53bn at the end of 2023 but still more compared to $5.24bn at the end of March 2023.