Overview

The economy flipped into recession in the second half of 2015, due to a negative weather shock in agriculture, weak external flows, the repercussions of a large-scale bank fraud, and tight monetary policy. Confronted with lower revenues and financing in 2015, the Government adjusted expenditures while prioritizing social payments. The already poor performing labor market remained weak in 2015. A severe summer drought, lower remittances, and higher inflation are estimated to have affected living standards in Moldova in 2015, pushing poverty into an upward trend.

The economy is projected to remain subdued in 2016, with growth close to nil. Accordingly, poverty is expected to decline only modestly in 2016, by less than one percentage point. As the economy stabilizes and investor confidence improves, Moldova is expected to slowly regain growth momentum, reaching its potential by 2017–18; slight reductions in poverty may follow.

Moldova has limited macroeconomic buffers and needs to deal with major governance issues. Moldova faces a need for fiscal consolidation to maintain fiscal sustainability while protecting the less well-off. Moving forward, strengthening labor markets is critical for growth and poverty reduction.

Last Updated: Apr 15, 2016

The World Bank Group Country Partnership Strategy (CPS) for FY14–17 is providing support to help reduce poverty and boost shared prosperity by capturing the full benefits of openness and integration with the EU and the broader global economy through three pillars:

(i) Increasing Competitiveness. Continued institutional reform of the business climate and governance, improved access to finance, and activities to improve companies’ competitiveness are needed to reduce barriers and translate economic openness into the concrete benefits of more jobs and higher income.

(ii) Enhancing Human Capital and Minimizing Social Risks. The widening gap with the EU28 in education and health outcomes should be reduced and progressively closed. Demographic challenges should be addressed. Vulnerabilities should be tackled through strengthened social protection systems.

(iii) Promoting a Green, Clean, and Resilient Moldova. The debilitating effects of climatic events on agriculture and rural livelihoods need to be addressed for sustainable development.

A mid-term CPS review (Performance and Learning Review [PLR]) was recently completed. The PLR reaffirmed the original CPS pillars and objectives, but also shined a light on the country’s changing circumstances, worsening governance environment, and mixed project-level experience. The main proposed modifications relate to: (i) World Bank flexibility in responding to urgent emerging needs; (ii) an adjustment of program content in relation to corruption and state capture; (iii) pipeline consolidation; (iv) the delay of some operations, pending policy decisions and commitment; and (v) project-level adjustments based on implementation experience.

Last Updated: Apr 15, 2016

Helping the Most Vulnerable

  • The number of beneficiaries of the targeted Ajutor Social program exceeded 55,000 households, when energy prices increased in November-December 2015;
  • Ajutor Social application time was reduced from 30 to 8 days between 2010 and mid-2015, when system streamlined the procedure and reduced paperwork;
  • Losses from fraud and errors in the social benefits system were reduced by 29 percent relative to 2010 with the help of the new Social Inspection unit;
  • Local welfare offices now use modern service delivery standards;
  • About 932,000 people benefited from Bank projects and more poor communities were empowered with the help of Moldova Social Investment Fund, founded with World Bank assistance.

Creating jobs in the private sector 

  • Compliance costs for enterprises were reduced by 35 percent by helping simplify business regulations with the World Bank Group assistance over the last five years;
  • 1,700 new businesses in high-value agriculture, livestock and small industries, and 7,000 new jobs were created since 2007 with the support of projects financing rural development;
  • Over 400,000 farmers benefited from high quality services of the Rural Development Agency (ACSA), created with the  World Bank assistance;
  • More than 50 export-oriented companies benefited from affordable long-term financing through a Bank-funded credit line;
  • Over 400 companies benefited from co-financing through a matching grants facility, including 206 businesses that adopted international quality management standards and another 210 companies that used business development services;
  • New Investment Promotion and Export Development Strategies were developed and are being implemented to stimulate Moldova’s economic development;
  • Moldova’s new Food Safety Agency (ANSA) helps modernize the food safety management system and facilitates market access for farmers, and it runs now with renovated offices and laboratories;
  • Moldova has improved the rules for corporate financial reporting, gradually adopting international practices.

Building a More Efficient Public Sector

  • More than 420,000 people benefitted from electronic public services under the Governance e-Transformation Project;
  • Moldova is implementing a new e-Transformation Policy and more than 40 laws and bylaws on electronic public services;
  • Through Open Government Data and Government Services Portals people can access now more than 880 government data sets and 131 electronic public services, such as e-Invoice, e-Visa, e-Integrity, e-Applications for Criminal Record and Activity Licensing, e-Registration to Social and Health Insurances Systems, Governmental Documents and the Records Management System, Enterprise Content Management Platform, M-Pass, M-Signature, M-Pay, M-Connect, etc;
  • Public institutions save money and time by using the shared computing infrastructure M-Cloud, as 35 public institutions already migrated their information systems to the M-Cloud;
  • More than 2,200 public servants and other employees of central and local public agencies received e-government training;
  • Over 10 million Civil Status Archive files and over 17 million Cadastral Archives files were digitized, improving access to the data;
  • Moldova is now implementing EU-compatible legislation on the civil service and public administration;
  • The new civil service legislation helped introduce merit-based recruitment, making it more transparent and clear “who does what in Government”;
  • The new human resources management system Civil Service Register has improved efficiency in personnel data management, in human resources reporting and in decision-making;
  • Ministries must undertake inter-ministerial and public consultations on policy documents and draft legislation under the new Law on Transparency in Decision Making, ensuring a better and more participative decision-making process.

Improving Education

  • 65 pre-school institutions were renovated, 600 received teaching materials – 42 percent of the national total – and 6,000 managers and teaching staff received modern training.
  • A new education management information system covering general pre-university education is in place, and school report cards are being produced and distributed annually to those institutions informing stakeholders of how their school performs on key indicators compared to the national average.
  • The revised national testing of all 4th and 9th grade students was completed and its results analyzed and publicly disseminated.
  • 100 percent of primary and secondary general schools have budgets allocated on a per-student formula.
  • Moldova has participated in PISA 2015 to enable it to internationally compare the performance of its education system.
  • Over 2,500 classes were reorganized in primary and secondary schools, and the student to teacher ratio increased to be closer to international standards. 
  • The new Scoala Mea online platform facilitates citizens’ engagement and monitoring of the quality of education school system. 
Improving the Quality of Health Services
 
  • Over 40 primary healthcare centers were rehabilitated across the country, offering improved access to health services to the residents in rural communities;
  • More citizens can benefit now from modern and high-tech health services via the new surgical block of the National Republican Hospital, constructed and opened with the help of the World Bank Group;
  • Quicker and more precise diagnoses became possible with the upgraded and newly equipped animal and human virology laboratories, with staff trained in diagnosis, surveillance and treatment of avian influenza and other infectious diseases. 

Natural disasters and climate change adaptation

  • A dual polarization Doppler radar system and a modernized network of automated weather stations were put into operation, resulting in improved forecast of severe weather;
  • Moldova opened an Emergency Command Center to better cope with climate change by enabling an improved disaster coordination response;
  • Farmers can now immediately get the necessary weather information from a Just-in-Time Mobile Communication Platform purposefully designed for mobile telephony;
  • Farmers benefited from over 50 pilot subprojects by using practical agricultural technologies for managing climate change risks;
  • The Emergency Agriculture project helped mitigate the effects of the 2012 drought, as in a two weeks period all farmers with a bank account received the compensation, and more than 70% of farmers without bank account had withdrawn the compensation from the Post Office;
  • The Emergency Agriculture project also contributed to transparency in public administration by showing how to implement an emergency operation, thus enabling Moldova’s first experience with a grievance mechanism implemented by the Government.

Sustainable Environment

  • Many thousands of trees were planted on 300 square kilometers of degraded land;
  • 6000 hectares of community land, mostly pastures, benefited from an improved management system;
  • Over 2,300 tons of pesticides and capacitors, containing persistent organic pollutants, were destroyed;
  • The World Bank helped set up a National Framework for the control and elimination of persistent organic pollutants, and supported new rules for toxic chemicals.

Increasing Access to Heating

  • Over 27,000 teachers and students, over 1.2 million patients and hospital visitors benefited from the support to the energy sector via improved and reliable access to heating throughout winter season in over 250 buildings in the country;
  • Student attendance increased by 5 percent during winter, thanks to the new central heating.

Building capacity and cooperation with Transnistria

  • Experts from both sides of the Dniester river met to develop proposals for cooperation in such areas as statistics, business and regulatory environment, health, transport, and youth entrepreneurship, thanks to the World Bank Group team efforts;
  • Training seminars for experts from Chisinau and Tiraspol were held on international best practice with public-private partnerships, procurement, and project proposal development.

Leading the Transport Dialogue

  • The World Bank Group is coordinating the transport joint donors’ group work in the country, helping Moldova do more road maintenance than ever before.

 

Last Updated: Apr 15, 2016


LENDING

Moldova: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments