25 Jun Introducing one of the most investment-friendly destinations in Europe
Having controlled COVID-19, the Eastern European Republic of Moldova is capitalizing on its strategic strengths to take its economy to the next level
Located at the crossroads of the European Union (UN) and the Commonwealth of Independent States, this month the small, democratic Republic of Moldova became one of the first in Europe to control the spread of COVID-19 to the extent that parts of its economy have returned to almost pre-pandemic levels.
A business-friendly and reform-focused government led by Prime Minister Ion Chicu efficiently limited the pandemic’s impact on the Eastern European country by quickly implementing measures that included a two-month lockdown. “As of today, Moldova has one of the lowest mortality rates related to coronavirus in Europe,” says Chicu. In total, it has recorded around 2,600 cases of the virus per one million of its 3.5 million population—less than half the rate recorded in the U.S., for example.
Now, the focus is on fully rebooting an economy that has seen sustained and robust growth in recent years, with its gross domestic product (GDP) rising by 3.6 percent in 2019. On top of its traditional strengths, such as agriculture, food processing, manufacturing, textiles and apparel, recent advances have been led by sectors like the automotive industry, freight transportation, retail and exports. Moldova also has a dynamic ICT sector, which has attracted many foreign businesses, as well as a growing reputation for innovation, research and development.
Rapid economic recovery
Like most countries, Moldova will take an economic hit this year but observers expect it to bounce back quickly, with the World Bank predicting a baseline 3.1 percent contraction for 2020, followed by 4 percent growth in 2021. There are many reasons for this, not least the republic’s pursuance of a balanced foreign policy and strong strategic partnerships with the EU—with which it has signed an association agreement—the U.S., Russia, Romania, Turkey, Hungary, China and many others. Overall, Moldova has free trade agreements with 43 countries and free access to a market of 880 million people. “Moldova is the only country in its region that can export its goods both to eastern and western markets, as well as to others,” states President of the Republic of Moldova, Igor Dodon.
These international connections—alongside its strategic location and infrastructure that includes an excellent rail system and a port that is a regional logistics hub—help explain why Molova’s buoyant export sector was one of the first parts of the economy to rebound after the pandemic. Other advantages the republic has in mitigating the crisis are a sound banking system and recently improved fiscal management. “Moldova ended last year with a budgetary deficit of around 1 percent and the rate of governmental debt to GDP is about 25 percent, the lowest in the region,” notes Chicu.
Moldova has achieved much since gaining independence from Russia 28 years ago but to take its economy to the next level, it is looking to attract more trade partners and international investors. Those investors will benefit from one of Europe’s lowest-cost workforces that has highly developed technical skills and an environment that the World Bank already ranks as the 47th best in the world for doing business but which will see further advantageous reforms within the next couple of years. These include substantial investment in public infrastructure including energy and transportation. To fund this, the government intends to issue a significant amount of Eurobonds in the coming months.
Moldova has created what Chicu calls: “The friendliest investment climate at the lowest tax rates in the region, with a specific tax regime for investors and free economic zones. Our strategy now is to offer all opportunities to investors.” As part of this, a large privatization program has been launched that includes the country’s railways. Welcoming international investors to look at the potential in the republic, the Prime Minister says: “I can guarantee that you will find opportunities for profitable business here in this wonderful country called Moldova.”