International Trade in Moldova

News Related to International Trade in Moldova

Business outline for Moldova

Main Industry Sectors

The agricultural sector represents approximately 11% of the GDP and employs 32.8% of the active population. Moldova main products are fruits and vegetables, tobacco and wine.

The secondary sector represents 14.5% of the GDP and employs almost 18.7% of the population. The national industry has to face a double challenge: the loss of its heavy industry since the self-proclaimed independence of Transnistria (a pro-Russian region), and its economic dependent position resulting from a lack of energy resources in its territory.

The GDP structure is progressively turning towards services, to the detriment of heavy industry and agriculture. The services sector represents 74.5% of the GDP and employs 48.4% of the active population. It is sustained by insurances, legal consultancy and telecommunications.

Economic Overview

From 1993, successive government administrations have attempted to bring reforms to Moldova's economy, with a certain amount of success. With the help of the funds from the IMF, the World Bank, as well as the EBRD, Moldova has been able to finance its reforms, specially in the banking and finance sectors. The economic growth of Moldava has been for a long time stimulated by consumption, real estate construction and capital transfers from Moldovan workers living abroad. Nevertheless, the country suffers from a lack of investments and an increase of the inflation rate of more than 14% in 2008.  Two factors have contributed to increase the general price level: on one side, the rise of the energy bills, mainly caused by the increase in the price of gas imported from Russia, and on the other side, the Russian embargo on wine and Moldovan food products between 2006 and 2009. 

The global economic crisis affected Moldova even though its banking sector, which is hardly adapted to loans and is not yet too open to the market economy, was less affected. The country was touched in three ways: the drop in transfers of funds from migrant workers living abroad (which accounts for almost 30% of the GDP), the drop in foreign investments and the drop in trade. Assistance was offered by the IMF in order to sustain the economy of the country, which remains the poorest country in Europe.  In 2009, the industrial sector experienced a decline of its production by 22% in relation to 2008.  At the beginning of 2010, Moldava's debt had reached USD 1.3 billion.

FDI in Figures

On January 1st, 2008, the FDI stock in Moldova was USD 1.8 billion. The flows had been increasing in the past years and in 2007 the country experienced a record year with USD 532 million of FDI. It was an increase of almost 50%, compared to 2006 when the flow was USD 370 million. 

All the same, from the end of 2008 and especially in 2009, the international situation slowed down the investment flows in the country. Additionally, despite a slow weakening of the national currency, the Lei remained a relatively strong currency compared to the other regional currencies that experienced clear devaluations and an increase in manpower costs, which is one of the country's main advantages. 

In a general view, the political and economic environment of the country does not favor the appeal for investments. The political instability, corruption, poor administration, etc. are many of the barriers that the reforms are trying to change, most of all in the context of its economic and energy dependence from Russia, and the frozen conflict with the secessionist region of Transnistria.

FDI Government Measures

The government established a number of mesures in order to promote investments in the country. Companies investing USD 250,000 can benefit from tax deduction for the first 5 years. Income tax was also lowered from 28% to 15% in 2007. The government also promoted equality amongst international and local investors and the fact that there is no limit to capital invested. These factors demonstrate the economy's liberalization.
For more information, refer to the Invest in Moldova website.

Country Strong Points

Moldova's main strong points are:
- A strategic location between Europe and Asia, an area that is booming;
- Cheap and skilled labor;
- Access to the black sea;
- A very low cost of living;
- Privatizations of a number of companies underway; and
- Investor-friendly taxes and duties.

Country Weak Points

Moldova still has to make significant progress to raise itself to the level of European economies. The main challenges that the country will have to take on are:
- The legacy of the communist era, namely red tape and corruption;
- Problems of respecting standards and intellectual property;
- A significant Russian influence;
- Infrastructures in bad shape; and
- The low purchasing power.

Foreign Trade Overview

In 2009, Moldova's exports reached USD 1.3 billion, which had a drop of 18% in relation to 2008.  The major areas of export are food products, alcoholic and non-alcoholic beverages, tobacco, textile and textile products and lastly, vegetable products. Moldova's main clients are Russia, Romania, Ukraine, Italy, Belarus, Germany, Poland, Turkey, the United Kingdom and Kazakhstan.

In 2009, Moldova's total imports were USD 3.2 billion, meaning a decrease of almost 33% in relation to the previous year. Moldova's main imports are mineral products, appliances and equipment, electro-technical material, chemical products, semi-precious metals and by-products, textiles and textile products, foodstuffs, plastic materials and rubber.

Moldova's main suppliers are Ukraine, Russia, Romania, Germany, Italy, China, Turkey, Belarus and Poland. The fact that the economies of most of these countries went into recession provoked a collapse of Moldovan exports in 2010.