GDP, current US$ billion
GDP per capita, current US$
Life Expectancy at birth, years
Despite a solid economic performance over the past two decades, Moldova remains among the poorest countries in Europe. Although a growth model reliant on remittance-induced consumption has generated high growth and reduced poverty, it had become less sustainable well before the recent series of overlapping crises. The decline in remittances, combined with a shrinking and aging population, has resulted in low productivity growth, and a significant number of the lower-income households have become dependent on pensions and social assistance.
The pandemic, the energy crisis, and the refugee flows caused by Russia’s invasion of Ukraine starkly exposed the vulnerabilities of Moldova’s growth model to shocks. Moldova is one of the countries most affected by the war in Ukraine, not only because of its physical proximity but also because of its inherent vulnerabilities as a small, energy dependent, landlocked economy with close linkages to both Ukraine and Russia. The impacts of the war and price spikes have resulted in additional fiscal costs, squeezing resources for long-term development priorities. And the influx of refugees has also created a challenging socioeconomic environment in the medium term, especially if many remain but fail to find employment opportunities.
Energy security and affordability continues to be a key concern due to the high dependence on energy imports and limited diversification of gas and electricity suppliers. Heavy reliance on short-term contracts, particularly for energy supply, adds to this vulnerability. Despite decreasing energy prices, both regionally and in the country, they remain above affordability level for residential and non-residential consumers further eroding the competitiveness of firms and household incomes, especially for the poor.
As economic activity continues to shrink due to weak investment and consumer confidence, the medium-term outlook will be influenced by the government's ability to counter the erosion of households' purchasing power while maintaining momentum in the reform program. At the current economic juncture, it is paramount that short-term recovery measures are complemented by long-term reforms that will help steer the economy away from the current economic model.
The new 2023-27 World Bank Country Partnership Framework for Moldova provides key elements to support the country in its efforts to transition to a new growth model, delivering targeted activities that respond both to the immediate crisis and to address Moldova’s longer-term development agenda with the goal to advance the EU agenda, especially since Moldova has been working to address and implement the conditions the European Council set forth for opening EU accession negotiation.
Last Updated: Oct 11, 2023