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- GDP (PPP):
- $12.0 billion
- 6.4% growth
- 3.5% 5-year compound annual growth
- $3,373 per capita
- Inflation (CPI):
- FDI Inflow:
Moldova’s economic freedom score is 55.5, making its economy the 115th freest in the 2013 Index. Its score has increased by 1.1 points since last year, reflecting a notable improvement in the management of government spending and a modest gain in trade freedom. Moldova ranks 39th among 43 countries in the Europe region, and its overall score is below the regional and world averages.
Moldova has gradually recovered from a sharp economic slowdown over the past three years. Driven largely by remittance-based consumption and credit expansion, renewed growth has injected 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. The government’s overall commitment to enhancing the entrepreneurial climate and advancing economic freedom has been uneven. Despite a number of privatizations, the public sector continues to play a dominant role in the economy. The foundations of economic freedom are not firmly institutionalized, with the judiciary remaining vulnerable to political interference and corruption.
Moldova became independent after the collapse of the Soviet Union in 1991 and continues to face a secessionist pro-Russian movement in Transnistria. The reformed Communist Party, which dominated Moldovan politics for most of 2000–2009, supported European integration and did not reverse market reforms instituted in the early 1990s. Since 2009, the center-right Liberal Democrat Party under Prime Minister Vlad Filat has led the Alliance for European Integration coalition government. In March 2012, the parliament elected pro–European integrationist and former judge Nicolae Timofti as president. Moldova has a largely agricultural economy. Foodstuffs, wine, and animal and vegetable products are the main exports. Moldova is one of Europe’s poorest countries, and remittances from other European countries, including Russia, constitute one-third of GDP.
The rule of law is not strongly sustained by an effective legal framework. The judiciary, though improved, is vulnerable to executive influence. Enforcement of intellectual property rights is sporadic. Moldova has one of the world’s highest software piracy rates. Corruption is perceived as widespread, especially in law enforcement, the judicial system, public service, political parties, the educational system, and the legislature.
The top income tax rate is 18 percent. The corporate tax was eliminated as of January 2008, and talks on its reinstatement have not come to fruition. Other taxes include a value-added tax (VAT). The overall tax burden equals 31 percent of GDP. Government spending is equivalent to 40.8 percent of total domestic output. The budget balance shows a small deficit, but public debt is below 25 percent of GDP.
Bureaucracy and a lack of transparency often make the formation and operation of private enterprises costly and burdensome. The business start-up process is now more streamlined, but obtaining necessary licenses continues to be time-consuming. Labor regulations are rigid. The non-salary cost of employing a worker is high, and restrictions on work hours are stringent. Inflationary pressures continue to weaken monetary stability.
The trade-weighted average tariff rate is low at 2.5 percent, but informal non-tariff barriers and a lack of transparency increase the cost of trade. Although foreign and domestic investors are treated equally, the overall investment regime is not conducive to dynamic investment growth. The financial sector is relatively stable, but the level of overall financial intermediation remains shallow, and government interference persists.