With an average income of less than $3,000, Moldova is the poorest country in Europe and performs badly on almost every Economic Competitiveness indicator. Mass education is a relative strong point, in line with regional trends, although this does not appear to translate into highly-skilled human capital, as the number of patents remains low (it should be noted also that the value of educational attainment under non-market systems can be difficult to assess accurately). Political instability and poor government effectiveness keep investors away, hampering economic growth.
The public sector still plays a dominant role in the economy, and privatisation has been sluggish. It requires more than 20 procedures to start an enterprise, the non-salary cost of employing a worker is high, and restrictions on working hours are rigid. An overriding problem for Moldova is the lingering political dispute over the secessionist enclave of Transnistria, which undermines the government's legitimacy and distracts the focus from economic reforms. Partially as a result of these conditions, capital investment is lacking.
Foreign investment faces hurdles from bureaucratic inefficiency, corruption and weak public institutions. Consequently, total foreign direct investment stock barely exceeds $1 billion. The development of a more open economy has been blocked by political tensions that, for example, have led to a drop in the country's main export good, wine, to Russia, which is its chief target market. , but The growth of a more open economy is also hindered by problems of smuggling in the disputed Transnistria region. At around 2% of GDP, foreign aid dependency is higher than for any other European country.
Moldova's Comparative Liveability indicators are as poor as its Economic Competitiveness indicators, including a low average income. Despite the existence of low unemployment (4.7%), citizens do not enjoy income levels that match their aspirations. This results in an outward migration rate of 34%, the highest in the region. The cold climate can only add to these problems, especially for people who cannot afford protection from the cold.
The state of public health is a key concern. Health expenditure per capita is below $200 per year, and 43%g of the population say they are dissatisfied with their personal health, according to the Gallup World Poll. The prevalence of HIV is among the highest in the region. Almost 20% of citizens smoke, and more than 10% are undernourished. Consequently, health-adjusted life expectancy is under 60 years, and the population is decreasing.
A long-term social reform programme and a poverty reduction strategy are in place, endorsed by the World Bank. Progress has been made, but there is far to go if Moldova is to achieve Comparative Liveability indicators comparable to its western neighbour, Romania. Widowhood in particular remains high, at 11.6%g. Working hours are short at an average 24.4 hours; however, in poor countries, this likely suggests underemployment rather than a choice to pursue more hours of leisure.
Source: Legatum Institute
