Country Private Sector Diagnostic

Creating Markets in Moldova: Country Private Sector Diagnostic

February 13, 2023

From a Remittances-Driven Economy to Private Sector-Led Sustainable Growth

Moldova is at a critical juncture: the economic growth drivers of the past decade are waning, further hindered by the lingering effects of the COVID-19 shock and more recently by the ripple effects of the Russian invasion of Ukraine. Against this backdrop, the Moldova Country Private Sector Diagnostic (CPSD) explores how, in the postpandemic world and in response to the Russian invasion of Ukraine, Moldova can reignite economic growth and social inclusion by harnessing private investment in critical enabling activities and tradable sectors, while strengthening the greening of the economy.

The CPSD outlines some of the most important challenges faced by the private sector, including the need to (i) accelerate the pace of reforms of the business environment, (ii) unleash the productivity potential of foreign and domestic firms by leveling the playing field, given the pervasive presence of SOEs and controls in the economy, and (iii) advance on the trade facilitation and harmonization agenda with the EU. An obsolete transport infrastructure further prevents Moldova from fully reaping the benefits of closer trade integration with the EU, while targeted reforms are required to improve access to finance for MSMEs. The three imperatives of tackling energy dependence, climate change and sustainable production, and growth of higher-sophistication exports can be achieved by boosting the performance of three sectors: (i) renewable energy, (ii) high value-added agribusiness, (iii) Information Technology Offshoring (ITO), and Business Process Outsourcing (BPO) and Shared Service Centers (SSC). The CPSD identifies these three sectors as areas of the economy in which the private sector can contribute to enhance productivity and economic diversification, to foster a more open and inclusive society and a greener development path.