According to cheeroutdoor, Moldova is in the process of transition to a market economy.
In 2002, relative growth was achieved in all sectors of the economy: the volume of GDP was 1,623.8 million dollars, GDP per capita was 448 dollars, inflation was 4.4%, and the average monthly wage was 691.9 lei, or 51 dollars.
Moldova is an agro-industrial country. The structure of GDP (2001) is dominated by the trend inherent in the transitional economy, with a steady increase in the share of the service sector – up to 55% (35% in 1999). The share of the agricultural sector – 22.7%, industry – 16.3% (25% in 1995), construction – 3%.
The priority sector of the economy is the agro-industrial complex, based on the processing of agricultural raw materials and the production of food products and drinks. The most significant industry is the wine industry. The largest export potential is concentrated here: 25% of total exports, 8% of state budget revenues, 9% of GDP. Important industries are sugar and tobacco. The share of the energy complex in industrial production is 23% (2000), mechanical engineering – 6%, light industry – 3%, building materials industry – 3%, forestry and woodworking – 2%, chemical industry -1%.
Agriculture is a strategic branch of the Moldovan economy. 2/3 of agricultural production is agricultural products. Wheat, sugar beets, tobacco, soybeans, potatoes, vegetables, grapes are cultivated. In the gross volume of agricultural production, crop production is 70%, incl. cereals 31%, grapes 10%, potatoes 7%, sunflowers and vegetables 5% each; share of livestock products 30% (2002). Breeding: cattle, pigs, sheep, goats, poultry. Beekeeping and fishing are cultivated. Traditionally, the most productive industry is viticulture. Moldova is one of the recognized countries producing wine products.
In 2002, the share of the private sector in agricultural production was 71%. 1,402,000 tons of grain crops, 1,116,000 tons of sugar beet, 12,000 tons of tobacco, and 660,000 tons of grapes were harvested.
Land fund (as of January 1, 2002) 3384 million hectares, incl. 772 thousand hectares (22.8%) are state-owned, 742.2 thousand hectares (21.9%) are owned by administrative-territorial formations, 1869 thousand hectares (55.3%) are privately owned. 75% of the land fund is agricultural land.
Moldova has a developed transport system. The length of motor roads is 9.5 thousand km (2002). The length of railways is 1150 km, inland waterways are 0.6 thousand km. Railway transport is represented by the monopoly enterprise “Moldavian Railway”. In 2002, the volume of freight traffic, 16.5 million tons, decreased by 4 times compared to 1992 (67 million tons), and the volume of passenger traffic decreased, respectively, from 658.6 million to 281 million people. The general state of the road network does not meet international standards. Air transport is served by 4 state, 6 foreign and 15 private airlines. In 2002, 296.4 thousand passengers were transported by Chisinau International Airport. Communications is represented by the telecommunications company JSC “Moldtelecom” with 3 mobile operators.
Moldova is characterized by an extremely low solvency of the population. In 2002, the volume of retail trade was 10.1 billion lei (18.4% of the pre-reform level).
In 2002, public service enterprises provided the population with a volume of services worth 3.98 billion lei, their growth by 11.4% compared to 2001 was achieved mainly due to an increase in prices and tariffs for services. During 1992-2003 the volume of services decreased by more than 5 times.
Tourist activity in Moldova is regulated by the Tourism Law (2000). It is carried out by the National Tourism Agency under the Government of the Republic of Moldova.
In 1991 Moldova proclaimed a course towards economic reform. Market transformations took place in the conditions of a severe crisis caused by shocks from the severance of economic ties with the USSR, a price shock in 1992 (monthly inflation of 1200%, a decline in production by 30%, real incomes fell by 54%), a military conflict in Transnistria, which destroyed a single territorial and economic complex of the country.
In 1993-2002, Moldova went through several stages of market reforms. Reforming the economy is based on strict principles of monetarism, recommendations and programs of the IMF, focusing more on ensuring macroeconomic stability than on developing the real sector of the economy.
The main efforts at the first stage (1992–95) were aimed at suppressing galloping inflation, reducing the state budget deficit, and creating market structures. In 1993, the national currency, the leu, was introduced, a two-tier banking system was created (the National Bank of Moldova (NBM) and 22 commercial banks), and mass privatization began with public property bonds. As a result of two privatization programs (1993–94 and 1995–96), 2,235 enterprises were privatized, 3.1 million people participated in privatization, and 90% of citizens became owners of public property bonds. In the agricultural sector, 48% of agricultural enterprises have been reorganized. Tasks for the next stage of reforms (1996-98): achieving macroeconomic stabilization and economic growth, monetary privatization of state property. The processes of transformation were inconsistent and contradictory, which confirms the evolution of GDP: a sharp decline to 30.9% in 1994 compared with 1993, a relatively slow decline – from 1.4 to 3.4% in 1995-99, in 1997 for the first time GDP increased by 1.6%. With the completion in 1998 of the third privatization program, the economy is dominated by the private sector (55% of GDP). The general depression of the economy in 1999 reached its peak: the decline in industrial production – 9% (compared to 1998), annual inflation – 43.7%. Due to the lack of own funds for transformations in the economy, Moldova’s dependence on external financing has increased, and the problem of repaying external debt has become chronic. With the completion in 1998 of the third privatization program, the economy is dominated by the private sector (55% of GDP). The general depression of the economy in 1999 reached its peak: the decline in industrial production – 9% (compared to 1998), annual inflation – 43.7%. Due to the lack of own funds for transformations in the economy, Moldova’s dependence on external financing has increased, and the problem of repaying external debt has become chronic. With the completion in 1998 of the third privatization program, the economy is dominated by the private sector (55% of GDP). The general depression of the economy in 1999 reached its peak: the decline in industrial production – 9% (compared to 1998), annual inflation – 43.7%. Due to the lack of own funds for transformations in the economy, Moldova’s dependence on external financing has increased, and the problem of repaying external debt has become chronic.
One of the main brakes on economic development is the energy complex. In 1999, the process of its denationalization began. On account of the huge debts for Russian gas, the privatization of the Moldovan JSC “Moldovogaz” ended with the transfer of a controlling stake in RAO “Gazprom RF”. External debt for Russian gas USD 1,137 million (March 2003), incl. USD 276 million debt of Transnistria. In the agrarian sector, by 2003, the Land program financed by the World Bank was completed: 546.8 thousand peasant farms, 1152 joint-stock companies, 1124 limited liability companies, 225 associations of peasant farms, 64 cooperatives, 4 collective farms were created; there were 1117 thousand owners of land.
The dynamics of domestic investment up to 2001 was declining: in 1998 by 25%, in 2000 by 15%. The total volume of foreign investment in 1994-2002 reached just over 400 million US dollars, per capita – 170 US dollars.
Having come to power in 2001, the Communist Party was forced to admit that during the reform period (1992–2000) the volume of GDP decreased by 3 times, in fact, the country was deindustrialized, the share of industry in the creation of GDP decreased by more than 2 times, after 1995 the share of industry in GDP has become less than the share of agriculture, which in its development has been set back by 35-40 years, real incomes of the population have decreased by almost 10 times. In 2001-02, structural reforms continued on a fundamentally new basis of modified legislation and a number of adopted programs aimed at strengthening state regulation of the economy. In the social sphere, since 2003, the implementation of an international project to overcome poverty in the Republic of Moldova began.
The main goal of the monetary policy pursued by the NBM is to maintain the stability of the national currency, create and regulate the money and credit markets. The volume of credits in the national economy in 1994-2002 increased 6.2 times, money in circulation – 6.6 times. In 2001, banking assets amounted to 5993.5 million lei, loans to the economy 3154.8 million lei, money in circulation – 1834.2 million lei. The dynamics of loans to the real sector of the economy is unfavorable. The ratio of loans to GDP decreased from 7.2% in 1995 to 4.5% in 2001. At the same time, the demand for loans in the real sector of the economy was supported by a decrease in the interest rate for a loan – from 377% in 1994 to 11.5% in 2003.
The NBM pursues a policy of freely floating exchange rate of the national currency. The goals of monetary policy are: strengthening the national currency and accumulating the country’s foreign exchange reserves (in 1994-2002 the lei depreciated more than 3 times). The NBM controls the repatriation of foreign exchange earnings, its free sale supports foreign exchange reserves (250.2 million US dollars as of April 1, 2003).
The goal of financial policy is to achieve a balanced state budget, reduce its deficit, and reduce the debt burden. In 2002, the revenue part of the budget was approved in the amount of 3593.4 million lei, the expenditure part – 3973.4 million lei, the deficit – 380 million lei. In the 1990s the level of the budget deficit gradually decreased from 10.3% of GDP in 1996 to 6% of GDP in 1997, reaching 0.5% of GDP in 2002. The total amount of state budget revenues is formed by 57% from indirect taxes and 21% from direct taxes.
An important reserve for increasing budget revenues is the reduction in the share of the shadow economy; in 2002 it reached 34% of GDP.
In Moldova since the 90s. an acute social problem persists – low incomes of citizens, poverty and poverty. In 2002, the average monthly wage was 691.9 lei ($51), the minimum consumer basket was 1,134 lei ($83). Cash income per capita in 2002 was 321.6 lei ($23), the average pension was 160 lei ($11.4). The savings of Moldovan citizens grew at a moderate pace. The total amount of deposits in lei at the end of 2002 was 708 thousand lei, per capita the amount of deposits was 195.7 lei. There is a huge differentiation in the incomes of the rich and poor segments of the population; in 2003 this ratio was 10.4:1. The costs of transformation led to rising unemployment. By 2003, there were 140 thousand unemployed. In search of work, there was a mass exodus of citizens abroad.
In 1994 foreign trade was liberalized, in 1995 all export-import restrictions were abolished. Under the terms of accession to the WTO, the customs duties in force in Moldova are from 0 to 15%, the average tariff rate is 6.75%.
The economy is extremely dependent on external relations. Almost completely dependent on energy imports, primarily from the Russian Federation. Due to the narrowness of the domestic market, more than 1/2 of the products produced are exported. The volume of foreign trade in 1994–97 grew from $1,224 million to $2,127 million. With outpacing growth rates of imports, there was a serious problem of a negative trade balance (348 million US dollars in 1997). In 1998, a sharp decline in the volume of trade to 1675 million US dollars is associated with a reduction in exports to the Russian Federation due to the financial crisis in the Russian Federation. In 2002, the volume of foreign trade was $1,718 million, exports were $666 million, imports were $1,052 million, and the balance was negative $386 million.
The structure of exports and imports has remained unchanged over the years of reforms. In exports – the lion’s share of food products, drinks, tobacco – 68% (2002), the share of textiles – 16%, leather and products from it – 3.6%. Imports are dominated by the share of energy resources – 22.8%, the share of machinery, apparatus, electrical equipment – 14%, chemical products – 11.2%. The main place in exports is occupied by the market of the CIS countries – 54.4% (2002), the EU market – 22.3%, the CEE market – 13.8%, the share of the CIS countries in imports – 40.2%, CEE – 23.8, EU – 25.1%. The priority direction is trade with the Russian Federation, its share in Moldovan exports is 37.1%, in imports – 15.3%.