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 still 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 COVID-19 pandemic. 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 population has become dependent on pensions and social assistance.
The pandemic, the energy crisis, and most recently, the refugee crisis starkly exposed the vulnerabilities of this growth model to shocks. Moldova is likely to be one of the countries most affected by the conflict not only because of its physical proximity to the war but also because of its inherent vulnerabilities as a small, landlocked economy with close linkages to both Ukraine and Russia.
The influx of refugees to Moldova has been substantial, totaling the equivalent of roughly 15 percent of Moldova’s population crossing the border since the onset of the war. Although more than three-quarters have transited to the European Union, the remaining influx of refugees will likely have additional fiscal costs, squeezing resources for long-term development priorities. The large wave of refugees could also create a challenging socioeconomic environment in the medium term, especially if many migrants remain but fail to find employment opportunities.
Heavy reliance on imports to meet food and energy needs has left Moldova vulnerable to disruptions in the supply of food, energy, and commodity imports from Ukraine and Russia. Additionally, Moldova is critically reliant on natural gas imported from Russia, including for powering its energy needs. Import disruptions are expected to increase price pressures, in turn eroding the competitiveness of firms and household incomes, especially for the poor.
As economic activity shrinks due to shocks from the war and the ongoing impacts of the COVID-19 pandemic, the Government, which has a strong mandate, parliamentary support, and trust among citizens and international partners, must find ways to mitigate the economic impact while maintaining momentum on the long-term agenda. 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.
Last Updated: Apr 19, 2022