Moldova

GDP (US$ Billion)

8.09 (2017)

World Ranking 144/192

GDP Per Capita (US$)

2,280 (2017)

World Ranking 137/192

Economic Structure

(in terms of GDP composition, 2017)

Services
(56.13%)
Industry
(18.51%)
Agriculture
(12.11%)

External Trade (% of GDP)

115.4 (2016)

Currency (Period Average)

Moldovan Leu

18.5 per US$ (2017)

Political System

Unitary parliamentary republic

Overview

Moldova is a small lower-middle-income economy. Although it remains a low-income country by European standards, it has made significant progress in reducing poverty and promoting inclusive growth since the early 2000s. The economy has expanded considerably over the last two decades, driven by consumption and fuelled by remittances from emigrant Moldovans that account for a quarter of GDP.

Sources: World Bank, HKTDC, Fitch Solutions

Major Economic/Political Events and Upcoming Elections

March 2016

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

April 2016

Moldova set its presidential election for October 30, the first time a new head of state would 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.

June 2018

A mayoral election victory by a pro-European Union (EU) candidate in the capital Chisinau was annulled by the judiciary, which ruled that both candidates had broken campaigning rules.

January 2019

Representatives of the Chinese telecommunications equipment manufacturer ZTE were welcomed by Moldova's prime minister to discuss investment in 5G technology infrastructure.

February 2019

Construction work was launched on the Ungheni-Chisinau pipeline as part of a strategically important natural gas supply infrastructure project.



Parliamentary elections on February 24, 2019, resulted in no party securing enough seats to govern the 101-seat legislature on its own. PSRM won 35 seats, the ruling PDM 30 seats and a pro-EU accession political bloc formed by two other parties won 26 seats.

Summer 2019

United States' government support for Moldova's beekeepers through the United States Farming Program will come to fruition with the certification of organic honey of Moldova, exports of which are expected to double in the next few years.

Sources: BBC Country Profile – Timeline, Balkan Insight

Major Economic Indicators
Graph: Moldova real GDP and inflation
 
Graph: Moldova real GDP and inflation
 
Graph: Moldova GDP by sector (2016)
 
Graph: Moldova GDP by sector (2016)
 
Graph: Moldova unemployment rate
 
Graph: Moldova unemployment rate
 
Graph: Moldova current account balance
 
Graph: Moldova current account balance
 

e = estimate, f = forecast

Sources: IMF, World Bank

Date last reviewed: March 22, 2019

External Trade

Merchandise Trade

Graph: Moldova merchandise trade
 
Graph: Moldova merchandise trade
 
 

Source: WTO

Date last reviewed: March 22, 2019

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: March 22, 2019

Trade in Services

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

Source: WTO

Date last reviewed: March 22, 2019

Trade Policies
  • Moldova joined the World Trade Organisation (WTO) in July 2001. Although overall Moldovan customs and trade laws comply with WTO requirements, the inconsistent implementation of WTO rules – such as the imposition of arbitrary requirements of additional certificates or permits – and the informal use of quotas on some imports or discriminatory treatment of businesses importing foreign-manufactured goods can constitute 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.

  • Moldova has signed 45 bilateral investment treaties, 37 of which are in force, and has 47 operational tax treaties for the avoidance of double taxation.

Sources: WTO – Trade Policy Review, UNCTAD, Invest Moldova, Fitch Solutions

Trade Agreement

Multinational Trade Agreements

Active

  1. The Central European Free Trade Agreement (CEFTA): This agreement – between Albania, Bosnia and Herzegovina, Serbia, Moldova, Montenegro, North Macedonia and Kosovo – came into force on May 1, 2007. CEFTA helps to increase trade between regional counterparts and fosters non-EU bilateral relations.

  2. Moldova-Armenia Free Trade Agreement (FTA): This bilateral FTA covers trade in goods and entered into force on December 21, 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.

  3. Moldova-EU FTA: This bilateral FTA, covering trade in goods and services, entered into force on September 1, 2014, as an association agreement and became a Deep and Comprehensive FTA (DCFTA) in July 2016. The EU is Moldova's biggest trade partner. An important part of the DCFTA is aligning Moldovan trade-related laws to selected EU legislative acts. The aim of Moldova's adoption of EU approaches to policymaking is to improve governance, strengthen the rule of law and provide more economic opportunities by widening the EU market to Moldovan goods and services.

  4. GUAM FTA: This plurilateral agreement – between Georgia, Ukraine, Azerbaijan and Moldova – came into force on December 10, 2003. It covers goods and services and is an economic integration agreement.

  5. Moldova-Kyrgyzstan FTA: This bilateral FTA covers trade in goods and entered into force on November 29, 1996.

  6. Moldova-Commonwealth of Independent States FTA: This agreement – between Moldova, Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Ukraine – covers trade in goods and entered into force on September 20, 2012.

  7. Moldova-Turkey FTA: This bilateral FTA covers trade in goods and entered into force on November 1, 2016.

  8. Moldova-Ukraine FTA: This bilateral FTA covers trade in goods and entered into force on May 19, 2005.

  9. Black Sea Economic Co-operation (BSEC): The BSEC came into existence on May 1, 1999 as a model for regional multilateral political and economic co-operation. The member states are Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, Russia, Serbia, Turkey and Ukraine. Areas for co-operation include agriculture and agro-industries, banking and finance, combatting crime, culture, customs, education, emergency assistance, energy, environmental protection, the exchange of statistical data and economic information, healthcare and pharmaceuticals, information communication technologies, institutional renewal and good governance, science and technology, small- and medium-sized enterprises, tourism, trade and economic development, and transport.

Under Negotiation

China and Moldova signed a memorandum of understanding on December 28, 2017, and are currently engaged in negotiations to conclude an FTA.

Sources: WTO Regional Trade Agreements database, Fitch Solutions

Investment Policy

Foreign Direct Investment

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

Source: UNCTAD

Date last reviewed: March 22, 2019

Foreign Direct Investment Policy

  1. 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 which might hinder the management, operation, maintenance, utilisation, acquisition, extension or disposal of investments.

  2. 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, UNCTAD, Fitch Solutions

Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive Programme Main Incentives Available
At present there are seven free economic zones (FEZs), one international free port (Giurgiulesti) and one international free airport (Marculesti) registered in Moldova According 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.



- For investments of more than USD5 million, a five-year exemption from tax on income from exports, zero value-added tax (VAT), exemption from excises and protection of residents against any new changes in the law for 10 years.



- 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 Port Commercial 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.
Industrial parks have been established at Floresti (near the border with Ukraine), Ungheni (near the border with Romania) and Cainari The industrial parks were established to host projects intended to last no less than 15 years and no more than 50 years.



Commercial residents of the park enjoy the following advantages:



- ready-to-use production facilities

- ready-to-use offices with low commercial rents

Sources: US Department of Commerce, International Business Company Welcome.MD, State Tax Service of the Republic of Moldova Tax Code Chapter 7, FEZ Moldova, Moldovan Investment and Export Promotion Organisation, Fitch Solutions

Taxation – 2019
  • Value Added Tax: 20%
  • Corporate Income Tax: 12%

Source: State Tax Service of the Republic of Moldova

Business Taxes

Type of Tax Tax Rate and Base
Corporate Income Tax (CIT)
 
- 12%

- Small- and medium-sized enterprises not registered VAT payers may opt for a special CIT rate of 4%

- The ceiling for registering as a VAT payer is MDL1.2 million

- Farms are subject to a CIT rate of 7%
Capital Gains - Taxed as normal income (CIT)

- Only 50% of the net gain is considered
Social security contributions - Social security fund: 18% of employees' gross salary and other payments (paid by employee)



- Health insurance contribution: 4.5% of employees' wages and other remuneration (paid by both employer and employee)
VAT/GST - 20%; standard rate

- 10%; accommodation services, food and beverages from public catering services

- 8%; on bread and bakery products, milk and dairy products, biofuels and medicines

- Food products for children are exempt from VAT
Tax on immovable property This is a local tax paid on real estate (land and/or construction on the land) by the property owner or owner of material rights. Residents and non-residents owning real estate located in Moldova have similar obligations. A 0.3% rate is applied on the property's estimated value or on its book value, while the maximum rate on property used for agricultural activities is 0.1%.
Withholding Tax There is no withholding tax on the distribution of dividends to resident legal entities. Otherwise, for non-residents, the rate is 12% on dividend income, royalties or interest, which may be reduced if a double taxation agreement exists.

Source: State Tax Service of the Republic of Moldova

Date last reviewed: March 22, 2019

Foreign Worker Requirements

Worker Migration

The government is 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.

Foreign citizens who want to engage in employment in Moldova must obtain a work permit from the National Agency for Employment (NAE) of the Ministry of Economy. To be granted the right to work, the employer or its legal representative must submit a variety of documents to the NAE. These documents include confirmation of the activity of the company (a certificate from the Tax Inspectorate on the lack of arrears to the national public budget, a copy of the financial report for the last period of management under the law in force), the original individual employment contract and confirmation of the provision of a rental space for the period requested (the owner’s declaration/rental agreement/sale-purchase contract).

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: Ministry of Foreign Affairs and European Integration of the Republic of Moldova, European Commission EURAXESS, Fitch Solutions

Risks

Sovereign Credit Ratings


 
Rating (Outlook) Rating Date
Moody's
 
B3 (Stable)
 
02/11/2018
Standard & Poor's Not rated
 
N/A
Fitch Ratings
 
Not rated N/A

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

Competitiveness and Efficiency Indicators


 
World Ranking
 
2017 2018 2019
Ease of Doing Business Index
 
44/190 44/190 47/190
Ease of Paying Taxes Index
 
31/190 32/190 35/190
Logistics Performance Index
 
N/A 116/160 N/A
Corruption Perception Index
 
122/180 117/180 N/A
IMD World Competitiveness N/A N/A N/A

Sources: World Bank, IMD, Transparency International

Fitch Solutions Risk Indices


 
World Ranking
2017 2018 2019
Economic Risk Index Rank N/A 114/202 111/202
Short-Term Economic Risk Score 55.6 44.6 44.2
Long-Term Economic Risk Score 62.2 49.5 51.1
Political Risk Index Rank N/A 119/202 118/202
Short-Term Political Risk Score 49.6 45.8 45.8
Long-Term Political Risk Score 50.1 58.2 58.2
 
Operational Risk Index Rank N/A 115/201 113/201
Operational Risk Score 47.2 46.2 46.6

Source: Fitch Solutions

Date last reviewed: March 22, 2019

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. 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 due to large-scale emigration and decreasing fertility rates. With encouragement from Brussels, Moldova is moving towards closer EU integration which should offer long-term benefits, but deep-rooted corruption and economic hardship are damaging confidence in the government. Although 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.

Sources: Fitch Solutions, World Bank

Date last reviewed: March 18, 2019

Fitch Solutions Political and 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: March 22, 2019

Fitch Solutions Operational Risk Index


 
Operational Risk Labour Market Risk Trade and Investment Risk Logistics Risk Crime and Security Risk
Moldova Score 46.6 39.8 51.1 52.2 43.4
Central and Eastern Europe Average 59.3 54.2 60.4 63.7 59.1
Central and Eastern Europe Position (out of 11) 7
 
8 7 7 6
Emerging Europe Average 55.9 53.8 57.7 57.0 55.2
Emerging Europe Position (out of 31) 22 27 22 19 20
Global Average 49.6 49.7 49.9 49.0 49.8
Global Position (out of 201) 113 159 98 78 117

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 Index Labour Market Risk Index
 
Trade and Investment Risk Index Logistics Risk Index Crime and Security Risk Index
Estonia 71.1
 
59.1
 
76.4
 
72.1
 
77.0
 
Czech Republic 70.9
 
57.7
 
67.9
 
73.7
 
84.5
 
Poland
 
69.6
 
55.6
 
69.4
 
75.0
 
78.4
 
Lithuania 68.4
 
55.2
 
71.5
 
75.6
 
71.5
 
Latvia 65.8
 
57.5
 
67.5
 
71.5
 
66.6
 
Hungary 64.0
 
55.6
 
62.0
 
66.9
 
71.3
 
Slovakia 63.3
 
49.7
 
66.5
 
63.4
 
73.5
 
Belarus 57.1
 
56.5
 
58.5
 
63.4
 
49.9
 
Russia 56.5
 
63.6
 
58.6
 
63.0
 
40.9
 
Moldova 46.6
 
39.8
 
51.1
 
52.2
 
43.4
 
Ukraine 46.5 54.9
 
48.8
 
52.0
 
30.5
 
Regional Averages 61.8
 
55.0
 
63.5
 
66.3
 
62.5
 
Emerging Markets Averages 46.7
 
48.1
 
45.5
 
47.4
 
46.0
 
Global Markets Averages 49.6
 
49.7
 
49.9
 
49.0
 
49.8
 

100 = Lowest risk; 0 = Highest risk

Source: Fitch Solutions Operational Risk Index

Date last reviewed: March 22, 2019

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: March 22, 2019

Hong Kong Connection

Hong Kong’s Trade with Moldova

Graph: Major export commodities to Moldova (2018)
 
Graph: Major export commodities to Moldova (2018)
 
Graph: Major import commodities from Moldova (2018)
 
Graph: Major import commodities from Moldova (2018)
 

Note: Graph shows the main Hong Kong exports to/imports from Moldova (by consignment)

Date last reviewed: March 22, 2019

Graph: Merchandise exports to Moldova
 
Graph: Merchandise exports to Moldova
 
Graph: Merchandise imports from Moldova
 
Graph: Merchandise imports from Moldova
 

Note: Graph shows the main Hong Kong exports to/imports from Moldova (by consignment)

Exchange Rate HK$/US$, average

7.75 (2014)

7.75 (2015)

7.76 (2016)

7.79 (2017)

7.83 (2018)

Sources: Hong Kong Census and Statistics Department, Fitch Solutions

Date last reviewed: March 22, 2019


 
2017
 
Growth rate (%)
Number of Moldovan residents visiting Hong Kong 164 -18.8
 

Source: Hong Kong Tourism Board


 
2017
 
Growth rate (%)
Number of European residents visiting Hong Kong 1,929,824 -0.2
Number of emerging European citizens residing in Hong Kong 89 1.13

Source: Hong Kong Tourism Board

Date last reviewed: March 22, 2019

Commercial Presence in Hong Kong


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



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, Fitch Solutions, State Administration of Taxation of the People's Republic of China

Visa Requirements for Hong Kong Residents

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

Source: Hong Kong Immigration Department

Date last reviewed: March 22, 2019

 

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