The onset of the global financial crisis in 2008 was rapidly reflected in Moldova’s growth figures. However, Moldova recovered rapidly from the contraction of its economy in 2009 as GDP growth in 2010 almost exactly made up for the economic downturn in the preceding year. Similarly, as of 2010, other major economic variables, including export volumes, remittances, and private consumption, showed signs of strong recovery. Nevertheless, FDI remained below levels registered in earlier years and the unemployment rate had also risen.

In spite of rapid growth in recent years, Moldova is still far below the per-capita incomes of its Western European neighbors. In terms of PPP current dollars, gross national income (GNI) per capita in 2010 was roughly one-tenth of the EU level (3,370 versus 31,657, respectively; World Bank 2012). In terms of per-capita Gross National Disposable Income (the sum of GNI and net current transfers), Moldova fares better, primarily as a result of high levels of workers’ remittances.

Moldova benefits from several development initiatives of the EU and the international development community. The country is a member of the Eastern Partnership within the European Neighbourhood Policy (ENP) of the EU. Most importantly, in 2008, the EU gave unlimited and duty free access to the EU market for all products originating in Moldova, except for certain agricultural products which remain subject to various restrictions (European Commission, 2011). As of 2010, the EU had become the main destination for the country’s exports (47 percent of total exports), overtaking Russia and other former Soviet countries (40 percent of the total) (Statistics Moldova, 2011). Also vis-à-vis Russia, market access for Moldova’s agricultural has been limited by trade barriers (Oprunenco, 2011). Strong demand for Moldova’s exports from its major trading partners could make a significant contribution to its future development.

During the period 1990-2010, Moldova’s population has been slowly decreasing, at annual rate of around 0.2 percent. UN Medium variant projections for Moldova foresee that the current population of 3.5 million (2010) will decline to 3.2 million by 2020, i.e. slightly more slowly, at around 0.1 percent per year. The principal reason for the population decline is extensive out-migration.

Primarily as a result of rapid growth in private consumption per capita (which, given the population decline, exceeds the total growth rate for private consumption), poverty has fallen drastically: between 2001 and 2010, the poverty headcount rate at $1.25 (PPP) fell from 26.5 to 0.4 percent, while the rate at $2 a day fell from 54.3 to 4.4. At the higher national poverty line, the decline during the same period was also very strong, from around 55.0 to 21.9 percent. At the same time, the income distribution became more equitable: between 2001 and 2010, the Gini coefficient fell from 38.6 to 33.0 (World Bank, 2012; World Bank 2011, p. 56).

Nevertheless, workers’ remittances from abroad are unevenly distributed among the Moldovan households, accruing mainly to households that, according to Moldovan standards and in large part thanks to the remittances, are relatively well-off. This increases the call for the government to resort to transfers and other policies to improve the living conditions of some of those who do not benefit from transfers from abroad. The relatively high energy costs during the last years have added to the demands for such policies, which are particularly important for the retired, the unemployed, and those who are outside the labor market.

However, for those who are part of the domestic labor market, emigration and remittances have had the positive side effect of significantly raising wage growth at home. With low emigration costs – 5