72710 v1 World Trade Indicators 2009/10 Moldova Trade Brief Trade Policy External Environment Moldova was a leading reformer in the Moldovan exports face a comparatively favorable Commonwealth of Independent States during the trading environment. Its Market Access TTRI3 early 1990s and it has a relatively liberal trade regime. (including preferences) of 1.2 percent is below that of Based on the latest MFN Tariff Trade Restrictive an average ECA (2.6 percent) or lower-middle-income Index (TTRI)1—on which it is ranked as the 12th out country (2.3 percent). The simple average of the of 125 countries—Moldova has an economy more overall rest of the world tariff (including preferences) open to trade than its comparators. Moldova’s TTRI is faced by the country’s exports is 9.4 percent. When 2.6 percent, which is below the averages of 4.4 percent weighted by actual exports it is 1.2 percent, and 8.4 percent for the Europe and Central Asia (corresponding to 2.3 percent for non-agricultural (ECA) region and the lower-middle-income country products and only 0.7 percent for agricultural group, respectively. Like the majority of countries in products), suggesting that Moldovan exports have its comparator groups, Moldova’s trade barriers for good access to international markets. The Moldovan agricultural goods are higher (7.2 percent) than for leu appreciated by 7.5 percent in real terms in 2008, non-agricultural goods (2.2 percent). Moldova’s simple making exporters less competitive abroad. average of the MFN applied tariff in 2008 is 4.7 percent, but when preferences are taken into account Since the beginning of 2008, when the EU granted it drops to 4.4 percent. Moreover, the share of tariff Moldova Additional Autonomous Trade Preferences, lines with zero MFN duties is 44.6 percent, almost Moldovan exports have had better access to the double the regional average. Moldova’s maximum markets of EU member states. With the exception of MFN applied tariff, excluding alcohol and tobacco, is some agricultural products, all Moldovan products 60.6 percent, which is lower than the regional average now have unlimited and duty-free access to the EU of 159.7 percent. The government’s trade policy space, market.4 However, also in 2008, the EU enforced anti- as measured by the wedge between bound and applied dumping duties on Moldovan steel ropes and cables. tariff levels (the overhang), was a low 2.3 percent in 2008. Moldova has one of the most liberal service Behind the Border Constraints trade regimes, and as such is ranked 1st out of 148 countries according to the GATS commitment index. Moldova’s business environment improved in the last year, and its Ease of Doing Business rank for 2009 As food prices soared, in January 2008, the Moldovan went to 94th out of 183 countries from 108th in 2008. government attempted to protect the domestic food The changes it implemented, such as introducing supply by reducing taxes on grains, removing a 5 expedited, 24-hour company registration services for percent import duty on wheat, and a 20 percent VAT an additional fee, also led to Moldova being ranked as on imported grains.2 the sixth top reformer for 2008/09. Moldova’s Logistics Performance Index score, which reflects the extent of trade facilitation in the country, is below the regional and income group averages, meaning that Moldova has a less conducive climate for trade. It Unless otherwise indicated, all data are as of August 2009 scores 2.31 on a scale of 1 to 5, with 5 being the and are drawn from the World Trade Indicators 2009/10 highest score, while the regional and income group Database. The database, Country Trade Briefs and averages are 2.59 and 2.47, respectively. Moldova Trade-at-a-Glance Tables, are available at ranked 106th out of 150 ranked countries and 18th in http://www.worldbank .org/wti. the ECA region (with Turkey leading the regional If using information from this brief, please provide the group). Its strongest logistics indicators are domestic following source citation: World Bank. 2010. ―Moldova logistics cost and timeliness of shipments reaching Trade Brief.‖ World Trade Indicators 2009/10: Country Trade destination, while its lagging ones are quality of Briefs. Washington, DC: World Bank. Available at transport and IT infrastructure for logistics, and http://www.worldbank.org/wti. World Trade Indicators 2009/10 Moldova Trade Brief efficiency and effectiveness of customs and other hard hit by the recession. Consequently, in the first border procedures. quarter of 2009, Moldovan exports fell by 17.7 percent compared to the year before.9 Foreign direct investment inflows accounted for 11.8 percent of Trade Outcomes Moldovan GDP in 2008. Moldova was able continue its trade growth momentum of 13.5 percent over the 2005–07 period Notes by registering a real growth of trade (in constant 2000 U.S. dollars) in goods and services of 12.5 percent in 1. TTRI calculates the equivalent uniform tariff that 2008. The slight slowdown was affected by a fall in would keep domestic welfare constant. It is weighted by import growth from 16.3 to 12.5 percent, though this import shares and import demand elasticity. was mostly offset by the increase in export growth 2. FAO, 2009. from 9.3 percent during 2005–07 to 12.4 in 2008. 3. MA-TTRI calculates the equivalent uniform tariff of Growth of both exports and imports is expected to trading partners that would keep their level of imports decline in 2009, with a steeper fall in imports as the constant. It is weighted by import values and import economy cools. demand elasticities of trading partners. 4. European Commission, June 2009. In nominal U.S. dollar terms, trade growth decelerated 5. EIU, June 2009, p. 13. to 29.5 percent in 2008 compared to 35.3 percent the 6. Banca Naţională a Moldovei, 2009. year before, driven by a slowdown in both export and import growth (30.4 to 23.7 percent for exports and 7. EIU, 2008, p. 22. 37.6 to 32.2 percent for imports). While growth of 8. EIU, June 2009, p. 15. service exports slowed by only a bit more than 2 9. Banca Naţională a Moldovei, 2009. percentage points, growth of goods exports fell by almost 9 percentage points. References The fall in imports can be traced to the fall in Banca Naţională a Moldovei. ―Balanţa de plăţi a remittances, which accounted for 34 percent of the Republicii Moldova.‖ August 7, 2009. . recipient of remittances as a share of GDP. Although Economist Intelligence Unit (EIU). 2008. Country Profile: remittances increased in dollar terms, they declined to Moldova. EIU. 31.4 percent of GDP in 2008. Remittances further ———. June 2009. Country Report: Moldova. EIU. declined in the first quarter of 2009, with their share of European Commission. June 2009. ―The Republic of GDP falling by 29 percent.5 Consequently, as Moldova.‖ European Commission. July 13, 3009. domestic demand declined, imports dropped in the . supplies account for Moldova’s largest import Food and Agriculture Association of the United Nations expenditure,7 the fall in imports was mostly influenced (FAO). June 26, 2009. ―Policy Measures Taken by by fall in demand, because the country has not yet benefited from the decline in oil prices. This is because Governments to Reduce the Impact of Soaring Prices the country mostly imports gas, and gas prices lag oil (As of 15 December 2008).‖ FAO. . exports has also declined sharply as its main trading partners—the EU and the Russian Federation—are