Part of Romania during the interwar period, Moldova was incorporated into the Soviet Union at the close of World War II. Although the country has been independent from the USSR since 1991, Russian forces have remained on Moldovan territory east of the Nistru River supporting the breakaway region of Transnistria, composed of a Slavic majority population (mostly Ukrainians and Russians), but with a sizable ethnic Moldovan minority. Years of Communist Party rule post-independence ultimately ended with election-related violent protests and a rerun of parliamentary elections in 2009. Since then, a series of pro-European ruling coalitions have governed Moldova. As a result of the country's most recent legislative election in November 2014, the three pro-European parties that entered Parliament won a total of 55 of the body's 101 seats. Infighting among coalition members led to prolonged legislative gridlock and political instability, as well as the collapse of two governments, all ruled by pro-European coalitions centered around the Liberal Democratic Party (PLDM) and the Democratic Party (PDM). A political impasse ended in January 2016 when a new parliamentary majority led by PDM, joined by defectors from the Communists and PLDM, supported Pavel FILIP as prime minister. Moldova remains Europe's poorest economy; the country signed and ratified an Association Agreement with the EU in 2014, which fully entered into force in July 2016 after ratification by all EU member states.
Eastern Europe, northeast of Romania
lignite, phosphorites, gypsum, limestone, arable land
Population - distribution
pockets of agglomeration exist throughout the country, the largest being in the center of the country around the capital of Chisinau, followed by Tiraspol and Balti
Romanian 80.2% (official) (56.7% identify their mother tongue as Moldovan, which is virtually the same as Romanian; 23.5% identify Romanian as their mother tongue), Russian 9.7%, Gagauz 4.2% (a Turkish language), Ukrainian 3.9%, Bulgarian 1.5%, Romani 0.3%, other 0.2% (2014 est.)
CHISINAU (capital) 725,000 (2015)
- Conventional long form
- Republic of Moldova
- Conventional short form
- Local long form
- Republica Moldova
- Local short form
- Geographic coordinates
- 47 00 N, 28 51 E
- Time difference
- UTC+2 (7 hours ahead of Washington, DC, during Standard Time)
- Daylight saving time
- +1hr, begins last Sunday in March; ends last Sunday in October
has not submitted an ICJ jurisdiction declaration; accepts ICCt jurisdiction
Despite recent progress, Moldova remains one of the poorest countries in Europe. With a moderate climate and productive farmland, Moldova's economy relies heavily on its agriculture sector, featuring fruits, vegetables, wine, and tobacco. Moldova also depends on annual remittances of about $1.12 billion from the roughly one million Moldovans working in Europe, Russia, and other former Soviet Bloc countries.
- External debt stocks
- US$ 6,338,405,000
- Total tax rate (% of commercial profits)
- Real Interest Rate
- Manufacturing, value added (% of GDP)
- Current Account Balance
- US$ -276,580,000
- Labor Force, Total
- Employment in Agriculture
- Employment in Industry
- Employment in Services
- Unemployment Rate
- Imports of goods and services
- US$ 4,843,320,551
- Exports of goods and services
- US$ 2,944,613,979
- Total Merchandise Trade
- FDI, net inflows
- US$ 124,390,000
- Commercial Service Exports
- US$ 1,010,360,000
vegetables, fruits, grapes, grain, sugar beets, sunflower seeds, tobacco; beef, milk; wine
sugar processing, vegetable oil, food processing, agricultural machinery; foundry equipment, refrigerators and freezers, washing machines; hosiery, shoes, textiles
- foodstuffs, textiles, machinery
- Romania 23%, Italy 10.2%, Turkey 9.4%, Russia 8%, Germany 6.6%, Belarus 6.4% (2015)
- mineral products and fuel, machinery and equipment, chemicals, textiles
- Russia 22.8%, Romania 18.1%, Ukraine 11.5%, Germany 7%, Italy 4.8%, Turkey 4.4% (2015)
- Country Risk Rating
- A high-risk political and economic situation and an often very difficult business environment can have a very significant impact on corporate payment behavior. Corporate default probability is very high.
- Business Climate Rating
- The business environment is difficult. Corporate financial information is often unavailable and when available often unreliable. Debt collection is unpredictable. The institutional framework has many troublesome weaknesses. Intercompany transactions run major risks in the difficult environments rated C.
- Agricultural potential
- Small open economy attractive to foreign investments
- Relatively cheap labor
- Dependence on remittances from workers abroad
- Political instability and social tensions
- Corruption and weak governance
The Moldavian economy is slowing recovering from the repercussions of a banking scandal involving the embezzlement of more than one billion USD (12.5% of GDP) and resulting in the collapse of three major banks in 2015. The return of concessional funding, suspended in the wake of this fraud, should help boost consumer spending and public investment, which could support the services and construction sectors. Growth in the agriculture sector (12% of GDP), in particular fruit, is expected to increase slowly. Manufacturing output (more than 20% of GDP, mainly textiles and automobile components) will continue however to suffer because of the sector’s poor competitiveness. Private investment is also likely to remain relatively weak, despite an easing in monetary policy (cut in the rate of interest from 19% in January to 9% in October 2016), because of the reigning political instability. Household consumption (80% of GDP) could feel the benefits of increased remittances from workers abroad, representing almost a quarter of GDP, thanks to the improving economic situation in Russia, from where a third of these inward flows come. Private demand is not expected to suffer from renewed inflationary pressures.
Inflation is likely to continue downwards following the sharp rise recorded in 2015, resulting from the increase in money supply to deal with the liquidity crisis in the banks. The cost of imported goods, in particular oil and gas, exacerbated by the ongoing downwards pressure on the leu exchange rate, will feed into this rise in prices.
The rescue plan for the three banks hit by the embezzlement cost public finances the equivalent of 10% of GDP in 2015 and happened at the same time as a suspension of certain external funding sources (EU, IMF, in particular). Spending cuts helped to limit the size of the deficit, but did not stop its increase in 2016. The return of concessional loans should enable a moderate increase in expenditure in 2017. The conditions imposed by the IMF in the agreement signed in July 2016 for financial aid worth USD 180 million (3% of GDP) could protect the country from a further deterioration in the budget balance. The level of the public debt should stabilize.
The current account deficit is expected to increase in 2017 under the combined effect of weak exports and increasing imports. Demand in the EU (over 60% of exports, namely to Romania, Italy and the United Kingdom) will not increase much, neither it will in Russia (around 10% of exports). Global prices for agricultural products (fruits and vegetables account for a quarter of exports) are not likely to rise very quickly. Imports are likely to increase with the slow upturn in private demand and public investment, alongside a gradual rise in energy costs. Transfers from workers abroad will not make up for the deterioration in the foreign trade balance, leading to a bigger current account deficit.
Following the sharp depreciation recorded in 2015 (-20% against the dollar), the exchange rate for the leu firmed up in 2016. Downwards pressure, further increased by the growing current account deficit, could ease slightly thanks to capital inflows from investors and international donors.
Supervision of the banks has been appreciably strengthened, but the sector remains very weak after the insolvency of the country’s three biggest banks. Government intervention prevented the collapse of the entire system but the percentage of non-performing loans remains above 10%.
Mr. Dodon, leader of the PSRM, with 52% of the votes, won the country’s first presidential election by universal suffrage for 20 years, held in November 2016. A fervent believer in closer economic ties with Russia, his powers will be limited and his victory is unlikely, at least in the short term, to result in Moldavia turning away from the EU, with which it signed an Association Agreement in 2014. In a country that is split between those wanting to open up to the West and those favoring rapprochement with Russia, political instability is likely to endure. Tensions, already high during the presidential election, the results of which are disputed by part of the population, could be aggravated in the run-up to parliamentary elections in 2017.
Secessionist ambitions of Transnistria, a region along the border with Ukraine and mostly populated by Russian-speakers, remain. The level of poverty in the country is high and business climate is not very attractive. Its performances in terms of governance are deteriorating according to the World Bank’s indicators, which ranked the country in 173rd place in the fight against corruption in 2015 (166th in 2014) and 140th for political stability (130th the previous year).