2016 Index of Economic Freedom

Moldova

overall score57.4
world rank117
Rule of Law

Property Rights40.0

Freedom From Corruption35.0

Limited Government

Government Spending55.6

Fiscal Freedom85.4

Regulatory Efficiency

Business Freedom64.6

Labor Freedom39.3

Monetary Freedom76.0

Open Markets

Trade Freedom73.6

Investment Freedom55.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 3.6 million
  • GDP (PPP):
    • $17.7 billion
    • 4.6% growth
    • 5.4% 5-year compound annual growth
    • $4,979 per capita
  • Unemployment:
    • 3.4%
  • Inflation (CPI):
    • 5.1%
  • FDI Inflow:
    • $207.4 million
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Driven largely by remittance-based consumption and credit expansion, Moldova’s relatively resilient economic growth over the past five years has created some momentum for improving the business environment and liberalizing the trade regime. However, the ongoing transition to a more stable market-oriented economy remains fragile.

Economic Freedom Snapshot

  • 2016 Economic Freedom Score: 57.4 (down 0.1 point)
  • Economic Freedom Status: Mostly Unfree
  • Global Ranking: 117th
  • Regional Ranking: 40th in Europe
  • Notable Successes: Trade Freedom and Fiscal Freedom
  • Concerns: Corruption, Labor Freedom, and Investment Freedom
  • Overall Score Change Since 2012: +3

The government’s overall commitment to enhancing the entrepreneurial climate and advancing economic freedom has been uneven. Despite a number of privatizations, the public sector still plays a dominant role in the economy. The rule of law is not firmly institutionalized, and the judiciary remains vulnerable to political interference and corruption.

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Background

Moldova gained independence after the collapse of the Soviet Union in 1991 but faces a secessionist pro-Russian movement in its Transnistria region. The country is poor, and excessive economic dependence on Russia threatens its sovereignty. The pro-Russia PSRM party won the most seats in the December 2014 parliamentary election but was kept from forming a government by a pro-European coalition of the center-right Liberal Democrat Party and center-left Democrat Party, forming the Political Alliance for a European Moldova. Association Agreements signed with the European Union in June 2014 include Deep and Comprehensive Free Trade Area (DCFTA) accords, and exports to the EU are increasing. Foodstuffs, wine, and agricultural products are the main exports, although the technology sector is slowly developing.

Rule of LawView Methodology

Property Rights 40.0 Create a Graph using this measurement

Freedom From Corruption 35.0 Create a Graph using this measurement

Most Moldovans see corruption as one of their country’s major challenges. It is a systemic problem that is deeply embedded in public institutions, especially in law enforcement, the judicial system, public service, political parties, the educational system, and the legislature. The constitution provides for an independent judiciary, but the legal framework is ineffective, and reform efforts suffer from lack of funds.

Limited GovernmentView Methodology

The top personal income tax rate is 18 percent, and the top corporate tax rate is 12 percent. Other taxes include a value-added tax. The overall tax burden equals 31.5 percent of GDP. Government spending amounts to 38.5 percent of total domestic output. The government budget has recorded a small deficit, and public debt has reached a level equivalent to over 30 percent of GDP.

Regulatory EfficiencyView Methodology

Bureaucracy and a lack of transparency often make the formation and operation of private enterprises costly and burdensome. Labor regulations are rigid. The non-salary cost of employing a worker is high, and restrictions on work hours are stringent. A marked pickup in inflation was driven by a rapid fall in the leu in early 2015.

Open MarketsView Methodology

Moldova’s average tariff rate is 5.7 percent. Foreign and domestic investors are generally treated equally under the law. Most state-owned enterprises have been privatized, but some remain in operation in such sectors as energy, telecommunications, and transportation. The financial sector is relatively stable, but the level of overall financial intermediation remains shallow, and government interference is significant.

Country's Score Over Time

Bar Graph of Moldova Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Moldova to other economic country groups Download Charts

Regional Ranking

rank country overall change
1Switzerland810.5
2Ireland77.30.7
3Estonia77.20.4
4United Kingdom76.40.6
5Denmark75.3-1.0
6Lithuania75.20.5
7The Netherlands74.60.9
8Germany74.40.6
9Luxembourg73.90.7
10Iceland73.31.3
11Czech Republic73.20.7
12Georgia72.6-0.4
13Finland72.6-0.8
14Sweden72-0.7
15Austria71.70.5
16Norway70.8-1.0
17Latvia70.40.7
18Poland69.30.7
19Cyprus68.70.8
20Spain68.50.9
21Belgium68.4-0.4
22Macedonia67.50.4
23Armenia67-0.1
24Malta66.70.2
25Slovakia66.6-0.6
26Hungary 66-0.8
27Albania65.90.2
28Bulgaria65.9-0.9
29Romania65.6-1.0
30Portugal65.1-0.2
31Montenegro64.90.2
32France62.3-0.2
33Serbia 62.12.1
34Turkey62.1-1.1
35Kosovo61.4N/A
36Italy61.2-0.5
37Slovenia60.60.3
38Croatia59.1-2.4
39Bosnia and Herzegovina58.6-0.4
40Moldova57.4-0.1
41Greece53.2-0.8
42Russia50.6-1.5
43Belarus48.8-1.0
44Ukraine46.8-0.1
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