Expert-Grup

War in Ukraine: How Great Is the Risk of Capital Outflows from Moldova and How Can Development Partners Help

Politici de creștere economicăSectorul financiarThursday, 10 March 20223468 views

Automatically translated summary. The full text is available in Romanian.

After the war in Ukraine began, concerns arose about possible capital flight from Moldova amid heightened regional risk. The Independent Think Tank “Expert-Grup” assessed the historical behaviour of capital flows in Moldova to gauge vulnerabilities across categories of external financial flows, identify macroeconomic consequences and propose policy measures.

The analysis finds that risks differ by type of flow. Foreign direct investment is somewhat volatile on inflows but not on outflows. External loans are 98% long-term, so outflows follow repayment schedules rather than external events. Portfolio investment is negligible: external liabilities stood at USD 25 million on 30 September 2021. Trade credits and advances depend on foreign trade, which regional events are expected to reduce.

Cash and deposits are the most volatile. In 2014, gross outflows reached a historical peak of USD 1,121 million, against gross inflows of USD 934 million, giving net outflows of USD 187 million, of which USD 108 million was a net fall in non-residents’ deposits in resident commercial banks. As of 30 September 2021, banks’ deposit liabilities to non-residents were USD 135 million, which could be withdrawn if regional risk is perceived as higher.

View the original in Romanian