Moldova

摩尔多瓦

Moldova: Market Profile

Picture: Moldova factsheet
Picture: Moldova factsheet

1. Overview

Moldova is a small lower-middle-income economy. Although the poorest country in Europe, it has made significant progress in reducing poverty and promoting inclusive growth since the early 2000s. The economy has expanded driven by consumption and fuelled by remittances, which account for a quarter of GDP, among the highest shares in the world.

Sources: HKTDC, Fitch Solutions

2. Major Economic/Political Events and Upcoming Elections

March 2016
Moldova's constitutional court ruled that presidential elections will be decided by popular vote and not by parliament.

April 2016
Moldova set its presidential election for 30 October, the first time a new head of state will be appointed by popular vote since 2001.

November 2016
Pro-Russian candidate Igor Dodon beat pro-European candidate Maia Sandu and won the presidential election.

Source: BBC country profile – Timeline

3. Major Economic Indicators

Graph: Moldova real GDP and inflation
Date last reviewed: August 21, 2018
Graph: Moldova real GDP and inflation
Date last reviewed: August 21, 2018
Graph: Moldova GDP by sector (2017)
Date last reviewed: August 28, 2018
Graph: Moldova GDP by sector (2017)
Date last reviewed: August 28, 2018
Graph: Moldova unemployment rate
Date last reviewed: August 21, 2018
Graph: Moldova unemployment rate
Date last reviewed: August 21, 2018
Graph: Moldova current account balance
Date last reviewed: August 21, 2018
Graph: Moldova current account balance
Date last reviewed: August 21, 2018

e = estimate, f = forecast
Sources: International Monetary Fund, World Bank

4. External Trade

4.1 Merchandise Trade

Graph: Moldova merchandise trade
Graph: Moldova merchandise trade

Source: WTO
Date last reviewed: August 21, 2018

Graph: Moldova major export commodities (2017)
Graph: Moldova major export commodities (2017)
Graph: Moldova major export markets (2017)
Graph: Moldova major export markets (2017)
Graph: Moldova major import commodities (2017)
Graph: Moldova major import commodities (2017)
Graph: Moldova major import markets (2017)
Graph: Moldova major import markets (2017)

Sources: Trade Map, Fitch Solutions
Date last reviewed: September 19, 2018

4.2 Trade in Services

Graph: Moldova trade in services
Graph: Moldova trade in services

Source: WTO
Date last reviewed: August 21, 2018

5. Trade Policies

  • Moldova joined the World Trade Organisation (WTO) in July 2001. While overall Moldovan customs and trade laws are in compliance with WTO requirements, inconsistent implementation of WTO rules, such as imposition of arbitrary requirements of additional certificates or permits, informal use of quotas on some imports or discriminatory treatment of businesses importing foreign-manufactured goods can constitute to non-tariff barriers to trade.
  • Moldova's average tariff rate is 4.4% for manufactured products and 13.5% for agricultural products. At the same time, Moldova applies a 0% rate on more than 35% of products in the tariff schedule.
  • In addition to import tariffs, imported goods are usually subject to a 20% value added tax (VAT). Furthermore, companies have to pay customs processing fees, which are determined on a case-by-case basis and depend on the value and final destination of goods, but the general rule is to apply a 0.4% fee on the value of processed goods.
  • Besides the customs duties, the Moldovan Customs Service may also levy exceptional duties, such as safeguard duty, anti-dumping duty or countervailing duty. The only exceptional duty applied in the past was a safeguard duty on sugar imports.

Source: WTO - Trade Policy Review, Fitch Solutions

6. Trade Agreement

6.1 Multinational Trade Agreements

Active

  1. The Central European Free Trade Agreement (CEFTA), consisting of Albania, Bosnia and Herzegovina, Serbia, Moldova, Montenegro, Former Yugoslav Republic of Macedonia (FYROM) and UNMIK/Kosovo came into force in May 2007 and helps increase trade between regional counterparts and fosters non-EU bilateral relations.

  2. The bilateral Free Trade Agreement between Moldova and Armenia covers trade in goods and entered into force in December 1995. Armenia is Moldova's 54th largest export market, and, as of 2017, Moldova exported 0.1% of its total exports to Armenia, of which pharmaceutical products made up the highest percentage.

Source: WTO Regional Trade Agreements database

7. Investment Policy

7.1 Foreign Direct Investment

Graph: Moldova FDI stock
Graph: Moldova FDI stock
Graph: Moldova FDI flow
Graph: Moldova FDI flow

Source: UNCTAD
Date last reviewed: August 21, 2018

7.2 Foreign Direct Investment Policy

  1. Under Moldovan law, foreign companies enjoy national treatment in most respects. In principle, the government views FDI as vital for sustainable economic growth and poverty reduction. However, the amount of FDI received is far below what Moldova needs to create jobs and promote economic growth.

  2. The government has approved an activity program for 2016-2018 that centres on EU integration, with the ultimate goal of applying for EU membership.

  3. There are no formal limits on foreign control, with the significant exception that foreigners are expressly prohibited from owning agricultural or forest land. Under Moldovan law, foreign companies enjoy national treatment in most respects. The Law on Investment in Entrepreneurship prohibits discrimination against investments based on citizenship, domicile, residence, place of registration, place of activity, state of origin, or any other grounds. The law provides for equitable and level-field conditions for all investors and rules out discriminatory measures hindering management, operation, maintenance, utilisation, acquisition, extension, or disposal of investments.

  4. Moldovan law restricts the right to purchase agricultural and forest land to Moldovan citizens. Foreigners may become owners of such land only through inheritance and may only transfer the land to Moldovan citizens. In 2006, Parliament further restricted the right of sale and purchase of agricultural land to the state, Moldovan citizens, and legal entities without foreign capital. However, foreigners are permitted to buy all other forms of property in Moldova, including land plots under privatised enterprises and land designated for construction.

Sources: WTO - Trade Policy Review, Fitch Solutions

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
At present, seven free economic zones (FEZs), one international free port - Giurgiulesti - and one international free airport - Marculesti - are registered in MoldovaAccording to Moldovan law, job creation, attraction of foreign and domestic investments, and export-oriented production are the main goals of such zones. The Law on FEZs regulates FEZ activity. Foreigners have the same investment opportunities as local entities. FEZ commercial entities enjoy the following advantages:

- 25% exemption from income tax;

- 50% exemption from tax on income from exports;

- For investments of more than USD1 million, a three-year exemption from tax on income resulting from exports;

- And for investments of more than USD5 million, a five-year exemption from tax on income from exports;

- Zero VAT;

- Exemption from excises; and protection of residents against any new changes in the law for 10 years;

- Furthermore, residents investing at least USD200 million in the FEZ are protected against new changes in the law for the entire period of operation in the FEZ, but such protection cannot extend beyond 20 years.
Giurgiulesti Free International PortCommercial residents of the port enjoy the following advantages:

- 25% exemption from income tax for the first 10 years following the first year when taxable income is reported;

- 50% exemption from tax on income for the remaining years; exemption from VAT and excises on imports and exports outside Moldova's customs territory;

- Zero VAT on imports from Moldova;

- And protection of commercial residents against any changes in the law until February 17, 2030

8. Taxation – 2018

  • Value Added Tax: 20%
  • Corporate Income Tax: 12%

Source: PwC Tax Summaries 2018

8.1 Important Updates to Taxation Information

Starting on January 1, 2018, the list of VAT-related terms has been amended and extended in line with European Union (EU) Directives.

8.2 Business Taxes

Type of TaxTax Rate and Base
Corporate Income Tax12%
Dividends6%
Social security contributions (all employers)- 23% of employer's gross salary for social security
- 4.5% as a percentage of wages for health insurance
VAT/GST (standard)20%  (standard)
Tax on Immovable Property0.3% rate or 0.1% for on property used for agricultural activities

Source: PwC Tax Summaries 2018
Date last reviewed: September 20, 2018

9. Foreign Worker Requirements

9.1 Worker Migration

The government is currently drafting amendments to the Labour Code and a new law on foreign work and migration. The changes are intended to make the legislative framework better equipped for modernisation of the labour market, skills development and vocational education training reform.

9.2 Work Permits

Moldova has no discriminatory visa, residence, or work-permit requirements inhibiting foreign investors' mobility in Moldova. The government has set up a one-stop shop for foreigners applying for Moldovan residence and work permits in a bid to streamline a complicated procedure.

Sources: Government websites, Fitch Solutions

10. Risks

10.1 Sovereign Credit Ratings


Rating (Outlook)Rating Date
Moody's
B313/01/2017
Standard & Poor'sN/AN/A
Fitch Ratings
N/AN/A

Sources: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators


World Ranking
201620172018
Ease of Doing Business Index
47/18944/19044/190
Ease of Paying Taxes Index
78/18931/19032/190
Logistics Performance Index
93/160N/A116/160
Corruption Perception Index
123/176122/180N/A
IMD World CompetitivenessN/AN/AN/A

Sources: World Bank, IMD, Transparency International

10.3 Fitch Solutions Risk Indices


World Ranking
201620172018
Economic Risk Index Rank113/202
Short-Term Economic Risk Score49.455.644.6
Long-Term Economic Risk Score60.762.249.5
Political Risk Index Rank120/202
Short-Term Political Risk Score4149.645.8
Long-Term Political Risk Score48.450.158.2
Operational Risk Index Rank118/201
Operational Risk Score46.747.2
45.3

Source: Fitch Solutions
Date last reviewed: August 21, 2018

10.4 Fitch Solutions Risk Summary

ECONOMIC RISK
Moldova’s economic environment is weighed down by persistent current account deficits and foreign debt accumulation. With growth in exports and remittance inflows vulnerable to shocks on account of challenging economic conditions in Russia, the country is exposed to balance of payments pressures that could affect exchange rate stability. Considerable structural reforms are needed in order to attract meaningful private investment growth and to reduce exposure to disruptions in the agriculture sector or remittance inflows. Meanwhile, the bank rescue of 2015 has put a strain on public finances, limiting the government's capacity to invest in growth and development.

OPERATIONAL RISK
Moldova continues to face a number of structural challenges that include inadequate energy infrastructure and a dwindling workforce. With encouragement from Brussels, Moldova is moving towards closer EU integration that should offer long-term benefits, but deep-rooted corruption and economic hardship are damaging confidence in the government. While there are impediments to developing a positive investment climate, Moldova's long-term growth potential remains compelling, particularly if wide-reaching reforms are implemented in the short-to medium term.

Source: Fitch Solutions
Data last reviewed: September 20, 2018

10.5 Fitch Solutions Political & Economic Risk Indices

Graph: Moldova short term political risk index
Graph: Moldova short term political risk index
Graph: Moldova long term political risk index
Graph: Moldova long term political risk index
Graph: Moldova short term economic risk index
Graph: Moldova short term economic risk index
Graph: Moldova long term economic risk index
Graph: Moldova long term economic risk index

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Economic and Political Risk Indices
Date last reviewed: August 21, 2018

10.6 Fitch Solutions Operational Risk Index


Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
Moldova Score45.339.849.248.743.4
Central and Eastern Europe Average61.155.063.463.662.5
Central and Eastern Europe Position (out of 11)101110119
Emerging Europe Average56.754.158.457.456.8
Emerging Europe Position (out of 31)2630242623
Global Average49.749.850.049.349.9
Global Position (out of 201)118159103101117

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: Moldova vs global and regional averages
Graph: Moldova vs global and regional averages
Country
Operational Risk IndexLabour Market Risk Index
Trade and Investment Risk IndexLogistics Risk IndexCrime and Secruity Risk Index
Estonia71.059.177.270.577.0
Czech Republic70.657.7
70.070.284.5
Poland
68.955.6
69.272.378.4
Lithuania67.455.2
71.871.371.5
Latvia65.157.5
68.467.966.6
Hungary63.255.663.462.471.3
Slovakia62.949.767.760.773.5
Belarus57.156.559.262.749.9
Russia56.063.656.263.440.9
Moldova
45.339.849.248.743.4
Ukraine45.154.945.649.530.5
Regional Averages61.155.063.463.662.5
Emerging Markets Averages46.8
48.0
47.545.846.0
Global Markets Averages49.749.8
50.049.349.9

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: August 21, 2018

11. Hong Kong Connection

11.1 Hong Kong’s Trade with Moldova

Graph: Major export commodities to Moldova (2017)
Date last reviewed: August 28, 2018
Graph: Major export commodities to Moldova (2017)
Date last reviewed: August 28, 2018
Graph: Major import commodities from Moldova (2017)
Date last reviewed: September 12, 2018
Graph: Major import commodities from Moldova (2017)
Date last reviewed: September 12, 2018
Graph: Merchandise exports to Moldova
Date last reviewed: August 28, 2018
Graph: Merchandise exports to Moldova
Date last reviewed: August 28, 2018
Graph: Merchandise imports from Moldova
Date last reviewed: September 12, 2018
Graph: Merchandise imports from Moldova
Date last reviewed: September 12, 2018

 

Exchange Rate HK$/US$, average
7.76 (2013)
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
Sources: Hong Kong Census and Statistics Department, Fitch Solutions


2017
Growth rate (%)
Number of Moldovan residents visiting Hong Kong164-18.8

Source: Hong Kong Tourism Board


2017
Growth rate (%)
Number of European residents visiting Hong Kong1,929,824-0.2

Sources: Hong Kong Tourism Board, Fitch Solutions
Date last reviewed: August 21, 2018

11.2 Commercial Presence in Hong Kong


2016
Growth rate (%)
Number of Moldovan companies in Hong KongN/AN/A
- Regional headquarters
- Regional offices
- Local offices

 

11.3 Treaties and agreements between Hong Kong and Moldova

  • Moldova has a Bilateral Investment Treaty with China that came into force in March 1995.

  • The Double Taxation Agreement (DTA) between China and Moldova was signed on June 7, 2000 and has entered into force in both countries on May 26, 2001.

Sources: UNCTAD, Government Sources, Fitch Solutions

11.4 Visa Requirements for Hong Kong Residents

HKSAR passport holders do not need a visa for Moldova for a period of up to 90 days.

Source: Hong Kong Immigration Department
Date last reviewed: September 19, 2018


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