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Moldova Economy
 
 
 

General

Moldova is the second smallest of the former Soviet republics and the most densely populated. Industry accounts for only 20% of its labour force, while agriculture's share is more than one-third. It remains the poorest country in Europe. The economy of Moldova mainly relies on the service sector (quasi 75%).

Moldova must import all of its supplies of petroleum, coal, and natural gas, largely from Russia. Moldova is a partner country of the EU INOGATE energy programme, which has four key topics: enhancing energy security, convergence of member state energy markets on the basis of EU internal energy market principles, supporting sustainable energy development, and attracting investment for energy projects of common and regional interest.

After the break up of the Soviet Union in 1991, energy shortages contributed to sharp production declines. As part of an ambitious economic liberalisation effort, Moldova introduced a convertible currency, liberalised all prices, stopped issuing preferential credits to state enterprises, backed steady land privatisation, removed export controls, and liberalised interest rates. The government entered into agreements with the World Bank and the International Monetary Fund to promote growth.

Following the regional financial crisis in 1998, Moldova has made significant progress towards achieving and retaining macroeconomic and financial stabilisation. It has, furthermore, implemented many structural and institutional reforms that are indispensable for the efficient functioning of a market economy. These efforts have helped maintain macroeconomic and financial stability under difficult external circumstances, enabled the resumption of economic growth and contributed to establishing an environment conducive to the economy’s further growth and development in the medium term.

Despite these efforts and recent resumption of economic growth, Moldova ranks low in terms of commonly used living standards and human development indicators in comparison with other transition economies. Although the economy experienced a constant economic growth after 2000: with 2.1%, 6.1%, 7.8% and 6.3% between 2000 and 2003 (with a forecast of 8% in 2004), one can observe that these latest developments hardly reach the level of 1994, with almost 40% of the GDP registered in 1990. Thus, during the last decade little has been done to reduce the country’s vulnerability. After a severe economic decline, social and economic challenges, energy uprooted dependencies, Moldova continues to occupy one of the last places among European countries in income per capita.

Moldova's rich soil and temperate continental climate (with warm summers and mild winters) have made the country one of the most productive agricultural regions since ancient times, and a major supplier of agricultural products in southeastern Europe.

Moldova is known for its wines. For many years viticulture and wine-making in Moldova were the general occupation of the population. The country has a well established wine industry. It has a vineyard area of 147,000 hectares (360,000 acres), of which 102,500 ha (253,000 acres) are used for commercial production. Most of the country's wine production is made for export. Many families have their own recipes and strands of grapes that have been passed down through the generations.

Tourism focuses on the country's natural landscapes and its history. Wine tours are offered to tourists across the country. Vineyards/cellars include Cricova, Purcari, Ciumai, Romanesti, Cojuşna and Milestii Mici.

Overview

Economy - overview :
Moldova remains one of the poorest countries in Europe despite recent progress from its small economic base. It enjoys a favourable climate and good farmland but has no major mineral deposits. As a result, the economy depends heavily on agriculture, featuring fruits, vegetables, wine, and tobacco. Moldova must import almost all of its energy supplies. Moldova's dependence on Russian energy was underscored at the end of 2005, when a Russian-owned electrical station in Moldova's separatist Transnistria region cut off power to Moldova and Russia's Gazprom cut off natural gas in disputes over pricing. In January 2009, gas supplies were cut during a dispute between Russia and Ukraine. Russia's decision to ban Moldovan wine and agricultural products, coupled with its decision to double the price Moldova paid for Russian natural gas, have hurt growth. The onset of the global financial crisis and poor economic conditions in Moldova's main foreign markets, caused GDP to fall 6.5% in 2009. Unemployment almost doubled and inflation disappeared – at -0.1%, a record low. Moldova's IMF agreement expired in May 2009. In fall 2009, the IMF allocated $186 million to Moldova to cover its immediate budgetary needs, and the government signed an new agreement with the IMF in January 2010 for a program worth $574 million. In 2010, an upturn in the world economy boosted GDP growth to 3.1% and inflation to 7.3%. Economic reforms have been slow because of corruption and strong political forces backing government controls. Nevertheless, the government's primary goal of EU integration has resulted in some market-oriented progress. The granting of EU trade preferences and increased exports to Russia will encourage higher growth rates, but the agreements are unlikely to serve as a panacea, given the extent to which export success depends on higher quality standards and other factors. The economy has made a modest recovery, but remains vulnerable to political uncertainty, weak administrative capacity, vested bureaucratic interests, higher fuel prices, poor agricultural weather, and the scepticism of foreign investors as well as the presence of an illegal separatist regime in Moldova's Transnistria region.


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