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- GDP (PPP):
- $17.7 billion
- 4.6% growth
- 5.4% 5-year compound annual growth
- $4,979 per capita
- Inflation (CPI):
- FDI Inflow:
Driven largely by remittance-based consumption and credit expansion, Moldova’s relatively resilient economic growth over the past five years has created some momentum for improving the business environment and liberalizing the trade regime. However, the ongoing transition to a more stable market-oriented economy remains fragile.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 57.4 (down 0.1 point)
- Economic Freedom Status: Mostly Unfree
- Global Ranking: 117th
- Regional Ranking: 40th in Europe
- Notable Successes: Trade Freedom and Fiscal Freedom
- Concerns: Corruption, Labor Freedom, and Investment Freedom
- Overall Score Change Since 2012: +3
Moldova gained independence after the collapse of the Soviet Union in 1991 but faces a secessionist pro-Russian movement in its Transnistria region. The country is poor, and excessive economic dependence on Russia threatens its sovereignty. The pro-Russia PSRM party won the most seats in the December 2014 parliamentary election but was kept from forming a government by a pro-European coalition of the center-right Liberal Democrat Party and center-left Democrat Party, forming the Political Alliance for a European Moldova. Association Agreements signed with the European Union in June 2014 include Deep and Comprehensive Free Trade Area (DCFTA) accords, and exports to the EU are increasing. Foodstuffs, wine, and agricultural products are the main exports, although the technology sector is slowly developing.
Most Moldovans see corruption as one of their country’s major challenges. It is a systemic problem that is deeply embedded in public institutions, especially in law enforcement, the judicial system, public service, political parties, the educational system, and the legislature. The constitution provides for an independent judiciary, but the legal framework is ineffective, and reform efforts suffer from lack of funds.
The top personal income tax rate is 18 percent, and the top corporate tax rate is 12 percent. Other taxes include a value-added tax. The overall tax burden equals 31.5 percent of GDP. Government spending amounts to 38.5 percent of total domestic output. The government budget has recorded a small deficit, and public debt has reached a level equivalent to over 30 percent of GDP.
Bureaucracy and a lack of transparency often make the formation and operation of private enterprises costly and burdensome. Labor regulations are rigid. The non-salary cost of employing a worker is high, and restrictions on work hours are stringent. A marked pickup in inflation was driven by a rapid fall in the leu in early 2015.
Moldova’s average tariff rate is 5.7 percent. Foreign and domestic investors are generally treated equally under the law. Most state-owned enterprises have been privatized, but some remain in operation in such sectors as energy, telecommunications, and transportation. The financial sector is relatively stable, but the level of overall financial intermediation remains shallow, and government interference is significant.