Moldova’s Current Account (CA) deficit widened by 51% y/y to $190mn in Q1, the central bank reported. In the rolling four quarters ending March 2018, the CA gap hit $681mn, or 8.4% of last year’s GDP.
Moldova’s CA gap had narrowed to $285mn in 2016, only to double to $616mn in 2017, and it further widened in Q1 this year. The main driver behind the deterioration of the country’s external position is the net imports of goods: 683mn (+31% y/y) in Q1 alone and $2.73bn (+27% y/y) in the rolling four quarters ending March.
Arguably the rise was in its turn stimulated by the stronger wage remittances (which explain only a part of the supplementary net imports) and by the local currency’s strengthening (particularly versus the US dollar — the benchmark foreign currency still used by the central bank). Indeed, the local currency strengthened by 17% versus the US dollar during 2017 and wage remittances plus personal transfers increased by 12% y/y to $1.64bn and further to $1.7bn in the four quarters ending March this year.
But the net inflows of wage remittances and personal transfers could not offset the sharp rise of the imports and the CA deficit widened significantly.