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- GDP (PPP):
- $12.2 billion
- -0.8% growth
- 2.8% 5-year compound annual growth
- $3,415 per capita
- Inflation (CPI):
- FDI Inflow:
Moldova’s economic freedom score is 57.3, making its economy the 110th freest in the 2014 Index. Its score has increased by 1.8 points, reflecting improvements in six of the 10 economic freedoms including investment freedom, control of government spending, monetary freedom, and business freedom. Moldova is ranked 39th among 43 countries in the Europe region, and its overall score is below the regional and world averages.
Over the 20-year history of the Index, Moldova has advanced its economic freedom score by over 24 points, the sixth largest improvement of any country. Its overall score increase has been driven by seven of the 10 economic freedoms, most notably a 75-point improvement in monetary freedom and a 63-point gain in trade freedom. Moldova reached “moderately free” status with its highest economic freedom score ever in the 2004 Index but has fallen back to “mostly unfree” since then.
Realization of growth potential remains constrained by state interference in the private sector, which has left the economy vulnerable in a changing political environment. Political instability has left fiscal policy fragmented, and corruption is significant in most areas of the bureaucracy.
Moldova gained independence after the collapse of the Soviet Union in 1991 and continues to face a secessionist pro-Russian movement in its Transnistria region. It remains poor, with a large percentage of the population working in Russia and the EU. 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 2010, the center-right Liberal Democrat Party under Prime Minister Vlad Filat has increased foreign investment by 25 percent. In March 2012, the parliament elected pro–European integration Judge Nicolae Timofti as president. Foodstuffs, wine, and agricultural products are the main exports, although the technology sector is developing.
Corruption is a major problem, especially in law enforcement, the judicial system, public service, political parties, the educational system, and the legislature. Leading politicians regularly trade accusations of graft and illegal business activity. The judiciary is constitutionally independent, but the legal framework is ineffective, and reform efforts suffer from lack of funds. Enforcement of intellectual property rights is sporadic.
The top individual income tax rate is 18 percent. The corporate tax, which was eliminated in 2008, has been reinstated at a 12 percent rate. Other taxes include a value-added tax (VAT). The overall tax burden is just over 30.8 percent of GDP. The government is continuing fiscal consolidation, and spending has fallen to 39 percent of GDP. Public debt is equal to about 24 percent of the domestic economy.
Launching a business takes six procedures and seven days, but completing licensing requirements still takes more than 100 days. Labor market rigidity continues to discourage dynamic job growth. Restrictions on work hours are stringent. Monetary stability has been relatively well maintained, but the state has increased agricultural subsidies in support of eventual EU membership.
Moldova has a 2.5 percent average tariff rate, and non-tariff barriers further impede trade. Efforts to privatize state-owned enterprises are ongoing. Rapid credit growth has supported private-sector growth, but long-term financing remains difficult. Overall, the financial sector remains constrained by structural impediments. Banks are the main source of business financing; non-banking financial sectors are underdeveloped.