Economic situation Potential as a production location

The former Soviet republic of Moldova has become a largely free economy since it became independent. Investors are increasingly viewing the country as an attractive location for the production of goods such as electronic components and software. The attraction is based on the relatively low level of taxes, operating costs and wages. Moreover, many people in Moldova speak English, Russian or German.

Construction work on the outskirts of Chisinau
Construction work on the outskirts of Chisinau

Factors that hamper economic development include the high level of skilled emigration, widespread corruption, and the country's dependency on gas imports from Russia (nearly 100 per cent) and the massive rise in energy prices since late 2021. There are plans to connect the country to the European power and gas market, which is hoped to improve energy security.

Since 2016, Moldova's gross domestic product has grown by over four per cent per year. Industries that have seen high growth rates in the recent past include, in particular, construction, wholesale and retail, and the restaurant and catering sector. Increasing foreign investment in the IT and electronics sector is also boosting growth. However, the country has been hit hard by the COVID-19 pandemic and an extreme drought in the summer of 2020. In 2020, gross domestic product declined by seven per cent. In 2021, the economy largely recovered thanks to revitalised private consumption and export demand and high agricultural output. According to current projections, the impact of the war in Ukraine will very likely lead to a recession.

Experts believe that, in order to stabilise the economy on a lasting basis, the government will have to undertake far-reaching structural reforms.