Compared with other former Soviet territories, Moldova is an outlier in terms of its poor economic performance. Political instability, together with a heavy dependence on remittances as well as international loans, means policy-makers must work carefully improve living standards through strategic reforms and closer alignment to Europe.
Moldova has been described as Europe’s poorest country. Strictly speaking, this is no longer true. The former Yugoslavian Republic of Kosovo had a lower level of GDP per person in price adjusted terms during 2010-24 (see Figure 1) – although Kosovo is not currently recognised as a state by the United Nations. At the same time, Ukraine’s GDP per capita has also slipped behind Moldova’s since the Russian invasion in 2022. Even so, Moldova is doubtlessly poor. Edging out an unrecognised state and an active warzone does little to counter this argument.
Figure 1. Moldova’s comparative level of GDP per person (purchasing power parities), 1990-2024
Source: World Bank Open Data, accessed 9 October 2025
Notes: GDP per person PPP levels in each year as a multiple of the level in Moldova in that year.
Moldova’s economy has grown relatively slowly over the past few decades. During the past 35 years, other economies have caught up and/or overtaken it. For example, Bosnia Herzegovina overtook Moldova in 1998. Back in 1990, levels of GDP per person in Moldova were almost as high as those in Romania and higher than those in Bulgaria. But by 2024, the Moldovan level was only about two-fifths of that in Romania and half the Bulgarian level. Belarus, similarly, overtook Moldova in 1992, and in 2024, the Moldovan level was only 57% of that in Belarus. Moldova’s comparative level has also dipped compared to Russia. China overtook Moldova in 2009.
As well as struggling in comparison to other countries, Moldova’s economic record also looks fragile when compared with its own recent history. Adjusting for inflation, the country’s GDP per capita in 2024 was only slightly higher than the level achieved 34 years earlier.
This is partly a product of political instability. Moldova declared its independence from the Soviet Union on 27 August 1991, and the first decade of independence was marked by very severe economic contraction. GDP per capita fell by about two-thirds during 1990-2000 (see Figure 2). But why did post-Soviet Moldova struggle so much?
Figure 2. Moldovan GDP per capita, constant prices, 1990-2024
Source: World Bank Open Data, accessed 9 October 2025
The breakdown of the Soviet Union was disruptive. For example, before the collapse of the bloc, Moldova was the USSR’s dominant producer of tobacco and cigarettes. Moldova had the additional challenge posed by the breakaway of Transnistria. This region, east of the river Dniester, was once home to a concentration of heavy industry and power generation during the Soviet period.
This is only the start of the challenges facing Moldova. Even within the territory which the Moldovan government controls, there are destabilising fractures of ethnic and national identity. Some aspire to remain independent, some to merge with Romania, and some to unify with Russia. In fact, in the October 2025 parliamentary election, the Patriotic Bloc (the Russia-friendly and left-wing opposition coalition of parties) gained 24.2% of the vote. The current Moldovan government claims that Russia spent $200 million (equivalent to about 1% of Moldova’s GDP) trying to influence voters during the election.
Studies of the explanations of international comparative economic growth emphasise the quality of institutions and governance, but Moldova’s government is inevitably distracted by questions of identity. There have also been major problems of fraud. In 2014, for example, $1 billion was embezzled from three banks. Such episodes do little to support the country’s political stability or its growth prospects.
Is Moldova’s current position sustainable?
While Moldova’s performance in terms of GDP growth appears poor, this has had a surprisingly limited effect on consumption levels within Moldova. In fact, average living standards are currently higher than might have been expected given the underlying economic data. This situation, however, may be difficult to maintain.
One factor to consider is the country’s demography. Moldova’s population and the volume of GDP both declined markedly during 1990-2024 (see Figure 3).
Figure 3. GDP and population level in Moldova, 1990-2024
Note: GDP in constant 2015 USD. Data exclude Transnistria.
Source: World Bank Open Data
The volume of Moldovan GDP dropped by 17%, while the population fell by 20% (largely because of net out-migration). This decline in population was sufficient to ensure that the absence of growth in GDP did not lead to a decline in levels of GDP per person. But at the same time, the declining population is itself imposing costs on the economy (Romania, Bulgaria and Kosovo had similarly large population declines during 1990-2024).
In the first half of the 2020s, Moldova’s population dropped by more than 50,000 in each year: more than a 2% annual decline. This has very real implications for day-to-day life in Moldova, particularly for families. In fact, it has been estimated that one-fifth of Moldovan children are being raised by one or no parents.
While the capital city, Chiṣinău, has managed to hold onto its population, there have been marked declines across rural areas. This puts further pressure on the political functionality of the country. More than half of the lowest layer of local government districts now have a population less than the legal minimum of 1,500 people.
Many of those who left the country are migrant workers (mainly men). The consequent flow of remittance payments back into Moldova bolsters domestic consumption. In 2024, net personal remittances were estimated as $1.5 billion – about one-seventh of national GDP. At the same time, the scale of the outflow of migrant workers creates labour shortages and leads to a worsening dependency rate, reducing the economy’s medium- to longer-term growth prospects. On the flipside, immigration into Moldova remains minimal, with the exception of Ukrainian refugees (127,000 were present in June 2025).
Moldova’s informal economy (e.g., unpaid family workers in farming) is substantial: according to the National Bureau of Statistics, such activity was equivalent to a quarter of GDP in 2019. As it stands, it is unclear whether the ‘informal economy’ is increasing or decreasing in relative size or how it compares to peer economies. But in any case, such unmeasured activity implies that ‘real’ living standards are higher than is suggested by the official GDP data, despite harmful impacts on efficiency and development.
Moldova’s current account deficit averaged 12% of GDP during 2019-24. This suggests consumption levels far outstripping domestic output. Inflows of private capital (foreign direct investment or portfolio investment) also remain low. The trade gap is funded mainly by soft international loans. Multilateral creditors include the IMF, World Bank, and the European Union (while support from USAID ended in January 2025 after President Trump disbanded the organisation).
This debt situation is sustainable as long as Moldova’s creditors have the appetite to keep lending. The IMF reckons Moldova remains just about within acceptable thresholds in terms of external financing. The net general government debt in 2025 was 35% of GDP (dominated by official external debt with long maturities and favourable interest rates), while S&P Global gave Moldova a sovereign credit rating of BB-/B. Despite this low rating, S&P Global speculates that the actual current account deficit is less than 12% to the extent that remittances were under-recorded.
What can be done?
To improve its economic prospects, policy-makers in Moldova should focus on several key areas.
Export led growth
Moldova’s exports have concentrated in low value-added sectors such as cereals, oil seeds and textiles. The National Development Strategy highlights electronics, pharmaceuticals and the creative industries as new frontiers, but competitiveness should also be increased in sectors where Moldova is likely to have a comparative advantage/competitive edge given its national resources. For example, tourism and some types of manufacturing (such as food processing and agriculture, which represent 7% of GDP) are likely to be ideal growth sectors.
There should be scope to expand foreign direct investment (FDI) with a greater focus on companies in target sectors. Moldova already has a ‘virtual business park’ for all its IT firms, with a corporation tax rate of only 7% (much lower than in the United States, UK or most of the EU). Firms in this group are also eligible for 100% exemptions from employer social security contributions and employee income tax.
Invest to promote growth through reform
Alongside the loans from the multilateral lenders, substantial funds should be invested to increase growth potential. Indeed, the EU has its ‘Growth Plan for Moldova’ which outlines €1.9 billion of investment during 2025-27. Such support is to be conditional on a reform agenda, with the EU support set to be aligned with Moldova’s own development plan.
Reforms have already begun, with an initial focus on tackling corruption in Moldova. On the Transparency International Corruption Perceptions Index (or CPI), Moldova has risen from 91st (with first being best) up to 76th from 2023 to 2024. Moldova’s CPI score of 43 equalled that of China and was higher than Ukraine’s score of 35. The 2024 score was 11 points higher than the country’s 2019 score, although Transparency International still categorised Moldova as being in the middle of a group which it termed “Flawed Democracies”.
Increase market access
Given current global geopolitics, ‘dual alignment’ between the EU and Russia is no longer a viable option for Moldova. Russia has been restricting its imports of fruit and vegetables from Moldova, as well as limiting the energy supplies going in the opposite direction. Indeed, the share of goods exports going to Russia has fallen from 35% in 2014 to just 8% in 2024.
The EU represents the larger market, taking 80% of Moldovan exports of goods. As it stands, Moldova’s labour market is already somewhat integrated into the EU jobs market. In fact, around 1 million Moldovans have adopted Romanian citizenship, enabling freedom to work in the EU. An EU-Moldovan Association Agreement began in 2014, and includes a ‘Deep and Comprehensive Free Trade Area’. Moldova then lodged an application for full EU membership in 2022.
Conclusions
Moldova’s 1990s post-Soviet slump was unusually severe, and recovery has been slow. The country has mitigated against being (almost) Europe’s poorest country through a heavy dependence on migrant remittances alongside substantial support payments from the global financial institutions.
But there is hope for the Moldovan economy. The country is developing impressive competitiveness through its industrial strategy based on inward investment. At the same time, there is no viable alternative to continuing to improve governance as well as moving to a closer, deeper trading relationship with the EU, which may or may not lead to full membership. Moldova’s economic future could be bright, if policy-makers tread carefully.
Where can I find out more?
- European Moldova 2030: Moldova’s National Development Strategy.
- Macroeconomic and financial assessment of the Moldovan economy: S&P Global sovereign credit rating for Moldova (October 2025).
- Long-run economic and demographic trends: OSW economic and demographic assessment of Moldova.
Who are the experts?
- OSW (Centre for Eastern Studies): A disappearing country? Moldova on the verge of a demographic catastrophe (January 2025).
- International Monetary Fund (IMF): Moldova country analysis and data.
- Professor Rebecca Haynes, University College London.
Acknowledgements
I have profited a lot from discussing Moldova with my son Calvin, a frequent visitor to the country. The usual disclaimer applies.
