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Economy of Moldova
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| Moldova enjoys a favorable climate and
good farmland but has no major mineral deposits. As a result, the
economy depends heavily on agriculture, featuring fruits, vegetables,
Moldovan wine, and tobacco. Moldova must import all of its supplies of
petroleum, coal, and natural gas, largely from Russia. After the break
up of the Soviet Union in 1991, energy shortages contributed to sharp
production declines. As part of an ambitious economic liberalization
effort, Moldova introduced a convertible currency, freed all prices,
stopped issuing preferential credits to state enterprises, backed steady
land privatization, removed export controls, and freed interest rates.
The government entered into agreements with the World Bank and the IMF
to promote growth. Recent trends indicate that the Communist government
intends to reverse some of these policies, and recollectivise land while
placing more restrictions on private business. The economy returned to
positive growth, of 2.1% in 2000 and 6.1% in 2001. Growth remained
strong in 2002, in part because of the reforms and because of starting
from a small base. Further liberalization is in doubt because of strong
political forces backing government controls. The economy remains
vulnerable to higher fuel prices, poor agricultural weather, and the
skepticism of foreign investors. In agriculture, the economic reform
started with the land cadastre reform. Following the regional financial crisis in 1998, Moldova has made significant progress towards achieving and retaining macroeconomic and financial stabilization. It has, furthermore, implemented many structural and institutional reforms that are indispensable for the efficient functioning of a market economy. These efforts have helped maintain macroeconomic and financial stability under difficult external circumstances, enabled the resumption of economic growth and contributed to establishing an environment conducive to the economy’s further growth and development in the medium term. Despite these efforts, and despite the recent resumption of economic growth, Moldova still ranks low in terms of commonly-used living standards and human development indicators in comparison with other transition economies. Although the economy experienced a constant economic growth after 2000: with 2.1%, 6.1%, 7,8% and 6,3% between 2000 and 2003 (with a forecast of 8% in 2004), one can observe that these latest developments hardly reach the level of 1994, with almost 40% of the GDP registered in 1990. Thus, during the last decade little has been done to reduce the country’s vulnerability. After a severe economic decline, social and economic challenges, energy uprooted dependencies, Moldova continues to occupy one of the last places among European countries in income per capita. In 2002 (Human Development Report 2004), the registered GDP per capita was US $381, equivalent to US $ 1,470 PPP, which is 5.3 times lower than the world average (US $ 7,804). Moreover, GDP per capita is under the average of all regions in the world, including Sub-Saharan Africa (US $ 1,790 PPP). In 2004, about 40% of the population were under the absolute poverty line and registered an income lower than US $ 2.15 (PPP) per day. Moldova is classified as medium in human development and is at the 113th spot in the list of 177 countries. The value of the Human Development Index (0.681) is below the world average. Moldova remains the poorest country in Europe in terms of GDP per capita: $ 2,100 in 2007. Information technology and telecommunications In 2007, the volume of investment in the telecommunications and information market in Moldova increased by 30.1% in comparison with 2006, achieving 825.3 million lei (65.5 million US dollars). The representatives of the National Agency for Telecommunications and Information Regulation stated that 451 million lei (35.9 million dollars) were invested in the field of fixed telephone communication. Investments constituted 330 million lei (26.2 million dollars) in the field of mobile telephony, 24.2 million lei (1.9 million dollars) in the field of Internet services, 19.1 million lei (1.5 million dollars) in the field of cable television services. An essential increase of 163 million lei (12.9 million dollars) has been achieved in the field of mobile telephony. In comparison with 2006, investments in this sector practically doubled. An insignificant increase was registered in the other market segments, but the investment volume remained the same in the field of fixed telephone communication. In 2007, investments in telecommunication and information technology exceeded the level of the previous year, due to the investments by the national operator of the stationary telephone communications in the Joint-Stock Company Moldtelecom for the implementation of CDMA technology, the investments of the operators of mobile telephony Orange, Moldcell and Eventis (GSM operator that started to activate in 2007) in the development of infrastructure, and the extension and improvement of Internet access services via new broadband technologies. |