The government has committed to eradicating pervasive corruption at the national and local levels, particularly in the judicial system. Vested interests—coupled with the prevalence of informal relationships, history of weak governance, particularly in the financial sector, and a corruption-prone court system—have proven to be obstacles, but the government continues to press ahead with anti-corruption initiatives.

The war in neighboring Ukraine has affected Moldova significantly, exposing its inherent vulnerabilities as a small land-locked country with close economic ties to both Ukraine and Russia.  Import disruptions in supply of food, energy, and raw materials are expected to increase price pressures.  An escalation of the war could lead to new waves of refugees and a challenging socioeconomic environment.

Moldova is implementing an ambitious reform agenda under the legacy of a large bureaucracy, which has enjoyed significant discretionary power under previous governments. The EU granted Moldova candidate status in June 2022, which includes a list of additional reforms Moldova will need to implement as it seeks full membership. Corruption and bureaucracy have historically stifled entrepreneurship as well as the economic reform that a vibrant private sector would demand.  The government has taken steps to introduce laws and regulations in harmony with EU legislation but, but work remains to make local legislation and practices fully compliant with EU standards.  Businesses still face cumbersome licensing procedures and excessive authorization requirements.

Persistent challenges over the years have been an aging population and a dwindling labor force.

Intellectual property rights (IPR) legislation is quite advanced; however, IPR enforcement remains weak.

The large inflow of remittances has led to consumption-based growth, which exposes the economy to risks during regional downturns.  Dependence on Russian energy imports and an economy that is still inefficient in energy use are challenges.  Weather-related events such as drought and flooding pose a constant risk to the agricultural sector.

Another challenge is Moldova’s relatively small market.