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Moldova Economical Facts

 

Economical overview

Moldova has had relatively rapid economic growth since the turn of the millennium, but it has come from a very low level. It is still one of Europe's poorest countries, with large social and economic gaps in society. Agriculture as well as the food industry and export are important industries. Corruption is a widespread problem that damages economic development.

In rural areas, most molds live on what their own land can provide, as well as on sales in the local market. Many city residents try to do different kinds of black jobs. The informal sector of the economy is estimated to be close to one third of the country's GDP.

  • Countryaah.com: Major imports by Moldova, covering a full list of top products imported by the country and trade value for each product category.

For those who have a formal employment, the low wage situation is a major problem. As a result, emigration in search of work is common. The foreign-working Moldavians are estimated to account for almost a quarter of GDP.

The existing industry is dependent on agricultural production and is dominated by the production of food and agricultural implements. Wine and rose oil go on export. However, the service sector has grown strongly in recent years, accounting for two-thirds of GDP in the mid-2010s and employing just over half the workforce.

Economical Facts of Moldova

Economic problems with historical roots

The dissolution of the Soviet Union in 1991 triggered a deep and protracted economic crisis. During the Soviet era (1944–1991) Moldova had supplied the rest of the Union with fruit, tobacco and wine and bought cheap natural gas and oil from Russia. When trade exchanges within the Union collapsed, the country's traditional export markets were lost.

  • Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including MDA which represents the country of Moldova.

At the same time, Moldova faced major problems with its energy supply. When Russia began to take world market prices for its energy exports, Moldova found it difficult to pay the costs. Fuel shortages occurred and the result was, among other things, major production declines in agriculture and industry. GDP more than halved between 1991 and 1994. The civil war in Transnistria (see special chapter) contributed to the collapse, partly because most of the industry was in the state of disruption and thus lost to Moldova.

In the early 1990s, economic reforms began with market economy as the goal, but the changes were slow. At the end of the same decade, a number of small and medium-sized companies in the retail and service sectors were privatized. In 2000, three power companies were sold out, and two years later Parliament agreed to privatize the country's large wine and tobacco companies. Land privatization was also implemented (see Agriculture and Fisheries).

The Moldovan economy continued to shrink throughout the 1990s, albeit at a slower rate. At the same time, inflation galloped and Moldova borrowed large sums abroad to cover its deficits. The country was heavily indebted and could not pay all energy imports. The electricity supply was switched off periodically.

Increased exports are turning the economy upwards

Although the 2001–2009 municipal government accelerated privatization somewhat, it was reluctant to agree to necessary but unpopular measures to decontaminate the debt-ridden economy. In 1998–2006, international credit institutions such as the World Bank and the International Monetary Fund (IMF) canceled several loan payments. In 2010, central government debt amounted to just over a quarter of GDP, which was about half of that in Latvia and a quarter of the central government's share of GDP in Iceland that year.

During the first decade of the 2000s, the economy began to grow. In 2000–2010, GDP increased by an average of 5 percent per year, though from a low level. An exception was 2009, when the economy shrank by a tenth as a result of the global economic downturn. Growth was driven by rising exports and domestic private consumption. But private investment remained few. Although inflation fell, it remained high. In addition, increased prices of Russian gas and Russian blockades against Moldovan wine hit the economy hard. Other challenges were high unemployment and large trade deficits abroad.

The EU-friendly bourgeois governments that have ruled since 2009 have aimed to bring Moldova closer to the EU and the Union's internal market, thus reducing dependence on Russia as a trading partner. This has required budgetary restructuring and a more rapid privatization process. The approach has encountered many obstacles, not least political struggles (see Modern History and Current Politics). But progress has been so clear that negotiations on a free trade agreement between the EU and Moldova started in 2012 and that the two parties signed an association agreement two years later. The reform process receives financial support from the World Bank, the IMF, the EU and the USA, and others. Russia's subsequent decision to impose import bans on wine, meat and fruit from Moldova from 2013 and 2014 was very noticeable for the export-dependent Moldovan economy.

Billion-class spoilage

A setback for both the country's economy and the reform processes came in April 2015 when it was revealed that around a billion dollars had been squeezed out of the country's three largest banks. It turned out that the banks had made payments corresponding to one-sixth of Moldova's GDP shortly before the November 2014 elections and that the money had ended up in foreign accounts, probably belonging to high-ranking politicians and businessmen. The central bank granted the banks a $ 700 million loan and the state took control of their operations to save them from bankruptcy, which could have caused the entire banking system in the country to crash.

The loans to the banks came as a heavy burden on the central government debt - and poor molds. The population also experienced rising inflation, a reduced value of the currency leu and tougher loan requirements as well as higher interest rates. Prices for gas, electricity and district heating were raised.

Although the governor took on the debt and resigned in September, the IMF made the decision later that month not to start negotiations with Moldova on new loans before investigating the causes behind the billion-dollar theft. Only in November 2016 did the IMF grant a three-year loan of $ 179 million. The loan terms were that the government pushed through economic reforms, that the business climate improved, that the banks' operations were reformed and that efforts to combat corruption increased.

FACTS - FINANCE

GDP per person

US $ 3 189 (2018)

Total GDP

US $ 11,309 million (2018)

GDP growth

4.0 percent (2018)

Agriculture's share of GDP

10.2 percent (2018)

Manufacturing industry's share of GDP

11.4 percent (2018)

The service sector's share of GDP

53.3 percent (2018)

Inflation

4.9 percent (2019)

Government debt's share of GDP

29.7 percent (2018)

External debt

US $ 6 974 million (2017)

Currency

leu

Assistance per person

US $ 68 (2017)

2007

March

Moldavians can become Romanians

The government is reacting negatively when the EU country Romania makes it easier for Moldovan citizens to apply for and obtain Romanian citizenship. With Romanian citizenship, Moldaver can travel freely within the EU without a visa. The Chi iinău government is withdrawing its decision to allow Romania to open two new consulates in Moldova.

2006

September

Transnistria stands firm on independence

A referendum in Transnistria reiterated the demand for independence from Moldova. The voters also support the outbreak region's plans to eventually become part of Russia.

January

Russian gas as a means of power

Moldova, which is dependent on gas imports from Russia, refuses to accept a sudden doubling of the price of Russian gas. As a result, the Russian gas giant Gazprom temporarily suspends gas supply to Moldova. The cranes are reopened when a compromise is reached between the two countries.

 

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