Economy of Moldova

Economy - overview: Moldova enjoys a favorable climate and good farmland but has no major mineral deposits. As a result, the economy depends heavily on agriculture, featuring fruits, vegetables, wine, and tobacco. Moldova must import all of its supplies of oil, coal, and natural gas, largely from Russia. Energy shortages contributed to sharp production declines after the breakup of the Soviet Union in 1991. As part of an ambitious reform effort, Moldova introduced a stable convertible currency, freed all prices, stopped issuing preferential credits to state enterprises, backed steady land privatization, removed export controls, and freed interest rates. Yet these efforts could not offset the impact of political and economic difficulties, both internal and regional. In 1998, the economic troubles of Russia, by far Moldova's leading trade partner, were a major cause of the 8.6% drop in gross domestic product; the value of the currency in relation to the dollar fell by half. In 1999, GDP fell again, by 4.4%, the fifth drop in the past six years; exports were down, and energy supplies continued erratic. GDP is expected to remain at about the same level in 2000.

Industry accounts for only 20% of Moldova's labor force, while agriculture's share is more than one-third. Moldova's proximity to the Black Sea gives it a mild and sunny climate. This makes the area ideal for agriculture, which accounts for about 40% of the country's GDP. The fertile soil supports wheat, corn, barley, tobacco, sugarbeets, and soybeans. Beef and dairy cattle are raised, and beekeeping also is widespread.

Moldova's best-known product comes from its extensive and well-developed vineyards, which are concentrated in the central and southern regions. In addition to world-class wine, Moldova produces liqueurs and champagne, and is known as well for its sunflower seeds, plums, peaches, apples, and other fruits.

Like many other former Soviet republics, Moldova has experienced economic difficulties. Since its economy is highly dependent on the rest of the former Soviet Union for energy and raw materials, the breakdown in trade has had a serious effect, exacerbated at times by drought and civil conflict. After the Russian ruble devaluation of 1998, Moldova's economy underwent a prolonged recession, from which it is only now beginning to emerge.

Nevertheless, Moldova has made substantial progress in economic reform. The government has liberalized most prices and has phased out subsidies on most basic consumer goods. A program begun in March 1993 has privatized 80% of all housing units and nearly 2,000 small, medium, and large enterprises. Other successes include the privatization of nearly all Moldova's agricultural land from state to private ownership, as a result of an American assistance program, "Pamint" ("land"), completed in 2000.

Inflation was brought down from over 105% in 1994 to 12% in Though inflation spiked again after Russia's 1998 currency devaluation, Moldova has made great strides in bringing it under control. (In 2000, it was down to 31%.) A stock market opened in June 1995. Moldova has International Monetary Fund standby and systemic transformation programs in effect.

Moldova made steady progress on economic reform[?] in 2001. The macroeconomic situation continued to be strong after showing dramatic improvement in 2000. Preliminary figures show that real GDP for the first half of the year was 4% greater than for the same period in 2000. After high inflation in 1999, the inflation rate was reduced to 18 percent in The budget deficit for the year 2001 is projected to be 1.5% of GDP compared with 7.5% in 1997 and 3.2% in 1999. The foreign exchange rate stabilized at the 12.5-13.0 MDL per USD range. During the first half of 2001, exports increased more rapidly than imports. Moldova, however, continued to depend on foreign sources, particularly for its energy needs. The government spent about one-fourth of its consolidated budget on public debt service, particularly for energy debt. The energy supply situation has improved for most of the country following the privatization of three out of five electricity distribution companies. In July, the Parliament passed legislation to privatize the tobacco industry and a number of wineries, removing one of the key impediments to the resumption of external financial assistance.

GDP: purchasing power parity - $9.7 billion (1999 est.)

GDP - real growth rate: -4.4% (1999 est.)

GDP - per capita: purchasing power parity - $2,200 (1999 est.)

GDP - composition by sector:
agriculture: 31%
industry: 35%
services: 34% (1998)

Population below poverty line: 75% (1999 est.)

Household income or consumption by percentage share:
lowest 10%: 2.7%
highest 10%: 25.8% (1992)

Inflation rate (consumer prices): 38% (1999 est.)

Labor force: 1.7 million (1998)

Labor force - by occupation: agriculture 40.2%, industry 14.3%, other 45.5% (1998)

Unemployment rate: 2% (includes only officially registered unemployed; large numbers of underemployed workers) (September 1998)

Budget:
revenues: $536 million
expenditures: $594 million, including capital expenditures of $NA (1998 est.)

Industries: food processing, agricultural machinery, foundry equipment, refrigerators and freezers, washing machines, hosiery, sugar, vegetable oil, shoes, textiles

Industrial production growth rate: -10% (1999 est.)

Electricity - production: 5.661 billion kWh (1998)

Electricity - production by source:
fossil fuel: 93%
hydro: 7%
nuclear: 0%
other: 0% (1998)

Electricity - consumption: 7.065 billion kWh (1998)

Electricity - exports: 0 kWh (1998)

Electricity - imports: 1.8 billion kWh (1998)

Agriculture - products: vegetables, fruits, wine, grain, sugar beets, sunflower seed, tobacco; beef, milk

Exports: $470 million (f.o.b., 1999)

Exports - commodities: foodstuffs, wine, and tobacco 66%; textiles and footwear, machinery (1998)

Exports - partners: Russia 53%, Romania 10%, Ukraine 8%, Germany 5%, Belarus 4% (1998)

Imports: $560 million (f.o.b., 1999)

Imports - commodities: mineral products and fuel 31%, machinery and equipment, chemicals, textiles (1998)

Imports - partners: Russia 22%, Ukraine 16%, Romania 12%, Belarus 9%, Germany 5% (1998)

Debt - external: $1.3 billion (December 1999)

Economic aid - recipient: $100.8 million (1995); note - $547 million from the IMF and World Bank (1992-99)

Currency: Moldovan leu (MLD) (plural lei)

Exchange rates: lei (MLD) per US$1 (end of year) - 12.1408 (January 2000), 10.5158 (1999), 5.3707 (1998), 4.6236 (1997), 4.6045 (1996), 4.4958 (1995)

Fiscal year: calendar year

See also : Moldova