Economy
GDP (2006): $3.35 billion ($2.9 billion in 2005; $2.6 billion in 2004).
GDP real growth rate (January-June 2007): 8.0% (5.0% in 2006; 8.6% in 2005; 6.5% in 2004).
Per capita GDP (2006): $937 ($890 in 2005; $766 in 2004: $540 in 2003).
Natural resources: Lignite, phosphates, gypsum, arable land, and limestone.
Agriculture: Products--vegetables, fruits, wine and spirits, grain, sugar beets, sunflower seeds, meat, milk, eggs, tobacco, walnuts.
Industry: Types--processed foods and beverages, including wine and refined sugar; processed fruit and vegetable products, including vegetable oil; dairy and meat products; tobacco items; metal processing and production of machinery; textiles and clothing, shoes; furniture.

Trade (2006): Exports--$1,051.6 million (of which 50% go to countries outside the former Soviet Union): foodstuffs, wine, textiles, clothing, footwear and machinery. Major markets--Russia, Romania, Ukraine, Italy, Belarus, Germany. Imports--$2,693.2 million (of which 60% come from countries outside the former Soviet Union): gas, oil, coal, steel, machinery and equipment, chemical products, textiles, foodstuffs, automobiles, and other consumer durables. Major suppliers--Ukraine, Russia, Romania, Germany, Italy. Currency: Moldovan Leu (plural Lei).

Exchange rate: Leu/US$ (2006): average 13.13; 12.91 (end of year); 12.60 (average in 2005); 12.33 (average in 2004); 13.94 (average in 2003).

MOLDOVA ECONOMY
Moldova remains the poorest country in Europe. It is landlocked, bounded by Ukraine on the east and Romania to the west. It is the second smallest of the former Soviet republics and the most densely populated. Industry accounts for less than 15% of its labor force, while agriculture's share is more than 40%.

Moldova's proximity to the Black Sea gives it a mild and sunny climate. This makes the area ideal for agriculture and food processing, which accounts for one third of the country's GDP. The fertile soil supports wheat, corn, barley, tobacco, sugar beets, and soybeans. Beef and dairy cattle are raised, and beekeeping is widespread. Moldova's best-known product comes from its extensive and well-developed vineyards concentrated in the central and southern regions. In addition to world-class wine, Moldova produces liqueurs and champagne. It is also known for its sunflower seeds, walnuts, apples, and other fruits.

Like many other former Soviet republics, Moldova has experienced economic difficulties. Since its economy was highly dependent on the rest of the former Soviet Union for energy and raw materials, the breakdown in trade following the breakup of the Soviet Union had a serious effect, exacerbated at times by drought and civil conflict. The Russian ruble devaluation of 1998 had a deleterious effect on Moldova's economy, but economic growth has been steady since 2000.

Moldova has made progress in economic reform since independence. The government has liberalized most prices and has phased out subsidies on most basic consumer goods. A program begun in March 1993 has privatized 80% of all housing units and nearly 2,000 small, medium, and large enterprises. Other successes include the privatization of nearly all of Moldova's agricultural land from state to private ownership, as a result of an American assistance program, "Pamint" ("land"), completed in 2000. A stock market opened in June 1995.

Following the economic difficulties caused by the Russian currency crisis of 1998, inflation dropped to 5.2% in 2002, the lowest level since Moldova's independence. However, inflation spiked again to 11.6 % in 2003 and never fell below 11% over the following years, rising as high as 12.7% in 2006. In 2006, Moldova faced twin external shocks - a two-fold increase in gas prices and a politically-motivated Russian ban on Moldovan wine imports, a key export item. While relatively stable in recent years, in 2007 the local currency appreciated because of a weakening U.S. dollar and pressure from record remittances from Moldovans working abroad. Reforms to the National Bank of Moldova in 2006 changed the central bank's policy priority from currency stability to price stability (fighting inflation). The National Bank of Moldova has the difficult task of sterilizing the money supply to contain stubbornly high inflation.

Moldova continues to make progress toward developing a viable free-market economy. The economy grew by an average 7% from 2000 to 2005 after years of recession since independence. External shocks in 2006 slashed economic growth to just 4%. After a budget surplus of 1.6% of GDP in 2005, the country had a slight deficit of 0.3% of GDP in 2006 despite better than anticipated revenue performance and prudent spending. The Moldovan economy continues to depend greatly on remittances sent from Moldovans working abroad. These inflows have increased to an estimated $1.2 billion a year.

Privatization results in recent years were not significant. Total proceeds in 2006 amounted to $12.4 million. Several smaller companies, two land plots in Chisinau and a large hotel were privatized in 2006. The government postponed indefinitely the privatization of large state enterprises in the power, telecommunications and agribusiness sectors. In 2007, Parliament passed a new law, introducing new approaches to privatizing and managing state-owned assets (including public-private partnerships), giving priority to economic efficiency. As the European Union expanded to Moldova's border, 2006 saw record high inflows of foreign direct investment. However, cumulative FDI since independence is only $1.28 billion, far below the country's needs. Sporadic and ineffective enforcement of the law, economic and political uncertainty, and government interference continue to discourage FDI inflows.

Spurred by soaring consumption and higher energy prices, imports have been growing more rapidly than exports. This was most prominent in 2006 when Moldova's trade deficit worsened as higher-priced energy imports surpassed exports, which were stunted by Russia's ban on Moldovan wine and agricultural products. Moldova traditionally exported between 70-80% of its wine production to Russia. The country lacks diversification in terms of sector development and export markets. The International Monetary Fund (IMF) and World Bank resumed lending to Moldova in July 2002, and then suspended lending again in July 2003. In early 2006, Moldova reached agreement with the Paris Club on rescheduling of Moldova's foreign debt. In addition, in the spring of 2006, the IMF reached an agreement with the Moldovan Government for a Poverty Reduction and Growth Facility designed to bolster foreign reserves against external shocks with a 3-year, $175 million program that includes a new IMF loan to the National Bank of Moldova.

Moldova continues to be subject to Russian economic pressure. In 2005, Russia enacted a ban on Moldovan agricultural products and in 2006, it banned imports of Moldovan wines. The wine ban has been particularly painful because, prior to the ban, Moldovan wines accounted for a third of the country's exports and 80% of wine exports went to Russia. Although Russian President Putin announced an end to the wine ban in November 2006, Russia had still not resumed importing Moldovan wine as of September 2007. In January 2006, Russian energy giant Gazprom temporarily cut off natural gas deliveries to Ukraine and Moldova - which is almost completely dependent on its neighbors for energy - and subsequently doubled the price of gas to Moldova. The impact has been substantial: Moldova's exports to Russia declined by 47.6% in 2006 and total exports dropped 3.6%, further contributing to a widening trade deficit (47% of GDP). In the first half of 2007, the country's trade deficit was already more than $1 billion (compared with $1.6 billion for all of 2006).

Moldova suffered from a severe drought during much of 2007 which caused hundreds of millions of dollars in agriculture sector losses and prompted concerns about food availability. In response to a request for assistance from the Government of Moldova, the United States provided $350,000 worth of seed to drought ravaged farmers in time for fall planting.

DEFENSE AND MILITARY ISSUES
Moldova has accepted all relevant arms control obligations of the former Soviet Union. On October 30, 1992, Moldova ratified the Conventional Armed Forces in Europe Treaty, which establishes comprehensive limits on key categories of conventional military equipment and provides for the destruction of weapons in excess of those limits. It acceded to the provisions of the nuclear Non-Proliferation Treaty in October 1994 and to the Biological Weapons Convention in December 2004. It does not have nuclear, biological, or chemical weapons. Moldova joined the North Atlantic Treaty Organization's Partnership for Peace on March 16, 1994. Due to Moldova's constitutional neutrality, it is not a participant in the Commonwealth of Independent States (CIS--a group of 12 former Soviet republics) Collective Security Agreement.