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Moldova, Economy

Dniester River, ownership shares, Fuel payments, state enterprises, crop harvest

Moldova’s rich black soil makes agriculture the foundation of its economy. When Moldova was part of the USSR, Soviet central planners made its primary role one of supplying food products to the rest of the Soviet Union. The Moldovan economy suffered from the disruption of trading relationships following the breakup of the USSR. The conflict in the Trans-Dniester region greatly compounded the economic turmoil. Moldova’s light industry, which is highly dependent on trade outside the republic, suffered the most. Moldova has survived many of the most severe hardships of its transformation to a free-market economy; however, the country’s economic vitality remains highly dependent upon the size of its crop harvest. The gross domestic product (GDP), which measures the value of goods and service produced, was $1.3 billion in 2000.

With assistance from the International Monetary Fund (IMF) and other international organizations, Moldova initiated widespread privatization and strict monetary controls soon after independence. The policies contained inflation—which had resulted in prices increasing by as much as 20 times annually in the early 1990s—to one of the lowest rates in the former Soviet republics. To privatize housing and industry, the government issued vouchers to residents based on the number of years they had worked for state enterprises. Residents exchanged the vouchers for ownership shares in enterprises or for housing. By 1997 the majority of former state enterprises were in private hands. Moldova was among the first of the former Soviet republics to allow private ownership of farmland.

Moldova’s economy is built upon agriculture, which contributed 28 percent of GDP in 2000. The country’s extremely fertile land and temperate climate allow for the cultivation of a variety of crops. Moldova is a leading producer of grapes, tobacco, and rose oil. Other crops include wheat; maize; vegetables, such as tomatoes and potatoes; sugar beets; and fruit. Livestock raising, particularly pigs, and milk production are also important.

Industry, which accounted for 20 percent of GDP in 2000, is dominated by food processing. The country has traditionally specialized in frozen and canned vegetables. It is also well known for sparkling wines and brandy produced from its grape harvest. Other industries use locally grown sunflowers and soybeans to make vegetable oil, and beets to process raw sugar. During the Soviet era, manufacturing plants were developed to produce military equipment and consumer goods, and Moldova remains a significant producer of carpets, refrigerators and freezers, washing machines, and televisions. Moldova also has a metal-refining industry, almost entirely dependent upon imported raw materials and fuels. More than one-quarter of Moldova’s industrial plants are in the disputed Trans-Dniester region.

While Moldova has small oil and natural gas reserves, it must import most of its fuels from Russia. Fuel payments are a constant drain on the country’s economy. In 1999, 94 percent of its electricity was produced in thermal plants burning fossil fuels; the remainder was produced in a single hydroelectric facility on the Dniester River.

Moldova’s principal trading relationships are with other former Soviet republics, chiefly Russia and Ukraine. Trade with countries to the west is increasing, led by exchanges with Romania and Germany. Food and agricultural products account for about one-half of exports, while the leading imports are fuel, electricity, and mineral products.

Moldova used the Russian ruble as its legal tender until November 1993, when it introduced its own currency, the leu (plural lei; 12.43 lei equal U.S.$1; 2000 average).

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