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- GDP (PPP):
- $18.9 billion
- -1.1% growth
- 3.4% 5-year compound annual growth
- $5,328 per capita
- Inflation (CPI):
- FDI Inflow:
Moldova’s economic freedom score is 58.4, making its economy the 105th freest in the 2018 Index. Its overall score has increased by 0.4 point, with improvements in property rights and judicial effectiveness outweighing declines in government integrity and trade freedom. Moldova is ranked 40th among 44 countries in the Europe region, and its overall score is below the regional and world averages.
With a moderate climate and productive farmland, Moldova’s economy in theory should be more prosperous. The domestic political impasse caused partly by Russia undercuts structural reform and realization of the country’s potential. The government has tried to address weaknesses in the financial sector, but growth is hampered by endemic corruption and a Russian ban on imports of Moldova’s agricultural products. The economy remains vulnerable to weak administrative capacity, vested bureaucratic interests, higher fuel prices, Russian political and economic pressure, and unresolved separatism in the Transnistria region.
Moldova was forced into the Soviet Union after World War II and faces a secessionist pro-Russian movement in its Transnistria region, where more than 1,100 Russian troops are encamped. Excessive economic dependence on Russia further threatens its sovereignty. In 2014, a pro–European integration coalition of the center-right Liberal Democratic Party, the Liberal Party, and the center-left Democratic Party of current Prime Minister Pavel Filip blocked efforts by the pro-Russia Party of Socialists of the Republic of Moldova (PSRM) to form a government. In 2016, the PSRM’s Igor Dodan narrowly won the first direct presidential election since 1996. Moldova remains one of Europe’s poorest countries. Its economy depends on emigrants’ remittances and agriculture, especially fruits, vegetables, wine, and tobacco.
A system for recording property titles and mortgages is in place, and Moldova has laws to protect all property rights. The judicial sector remains weak and does not always fully guarantee the rights of citizens and foreign investors. Transparency International has urged withdrawal of pending legislation that would grant impunity to corrupt officials, civil servants, and businesses that declare illicitly acquired assets.
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 31.6 percent of total domestic income. Over the past three years, government spending has amounted to 38.0 percent of total output (GDP), and budget deficits have averaged 2.1 percent of GDP. Public debt is equivalent to 38.1 percent of GDP.
In 2016, Moldova made starting a business more expensive by increasing the cost of company registration. Getting electricity was made easier for small businesses, but several tax rates that businesses pay were raised. Labor regulations are rigid. The nonsalary cost of employing a worker is high. The government has resisted pressure from the International Monetary Fund to reduce agricultural subsidies.
Trade is extremely important to Moldova’s economy; the combined value of exports and imports equals 115 percent of GDP. The average applied tariff rate is 3.4 percent. Nontariff barriers impede trade. Government openness to foreign investment is below average. The financial sector is relatively stable, but the level of financial intermediation remains shallow, and government interference is significant.