Moldova at a Crossroads: Tackling Poverty Through Reform and Resilient Development

The World Bank's Moldova Poverty Assessment reveals that poverty reduction in Moldova has stalled due to declining remittances, fragile pensions, and deep rural-urban disparities. Structural reforms are urgently needed to build inclusive, climate-resilient growth and support the country’s EU aspirations.

The World Bank’s Moldova Poverty Assessment, authored by experts from its Europe and Central Asia Poverty and Equity team (EECPV) in collaboration with Moldova’s National Bureau of Statistics and National Employment Agency (ANOFM), sheds light on the country’s halted progress in reducing poverty. Despite a strong track record between 2006 and 2014, during which poverty rates dropped from over 30 percent to just above 11 percent, Moldova has recently struggled to maintain momentum. The traditional poverty-reducing forces remittances from abroad and pension-driven consumption, are now faltering. Remittance flows have declined both at the national level and within households as second-generation migrants abroad become less financially connected to their home country. Pensions, though periodically increased, remain low and are burdened by Moldova’s shrinking and aging labor force. With fewer contributors and more dependents, the sustainability of the pension system is in question. Simulations predict that by 2100, fewer than half of elderly Moldovans will be eligible for a pension under the current system.

Rural Moldova Bears the Brunt of Structural Inequality

Nowhere are Moldova’s inequalities more visible than in rural areas, where over 80 percent of the nation’s poor reside. Despite comprising just 60 percent of the population, rural residents experience poverty at nearly three times the rate of their urban counterparts. Poor infrastructure, weak educational outcomes, and scarce job opportunities keep these communities locked in cycles of disadvantage. The educational gap is alarming: rural students score the equivalent of two academic years behind urban students in international assessments. Adults in rural areas tend to work in agriculture or in own-consumption farming, low-productivity activities with limited income potential. The small-scale nature of Moldovan agriculture, a result of post-Soviet land reforms, has created a fragmented system where most landholders farm less than 10 hectares. These small plots, coupled with low adoption of irrigation and modern farming practices, result in weak output and chronic income instability. When climate shocks strike as they frequently do in Moldova, small farmers suffer devastating losses. The drought of 2020, for example, reduced agricultural output by over 22 percent for individual farms and caused more than $300 million in damage.

Weak Labor Markets and Stubborn Inactivity

Moldova’s labor market presents a paradox: the economy has grown, but the benefits haven’t translated into broad employment gains. Labor force participation remains among the lowest in the region, especially for women, the elderly, youth, and people with disabilities. Six in ten adults over the age of 15 are not economically active, and among the poor, two out of three are out of the labor force entirely. Barriers such as care responsibilities, gender norms, skill mismatches, and inaccessible workspaces prevent many from entering or remaining in the job market. Employers frequently cite a shortage of skilled workers, with digital and socio-emotional skills in particular short supply. Even among those employed, job quality is a serious concern. Informality is rampant, wages are low, and one in seven employed Moldovans still lives in poverty. The education system has not kept pace with market needs, and vocational training remains underdeveloped. Youth in rural areas face particularly grim prospects and often migrate abroad, further depopulating villages and placing additional strain on local services.

Climate and Energy Shocks Deepen Household Vulnerability

Compounding Moldova’s challenges are its extreme vulnerability to climate and energy shocks. Located in a region prone to droughts and floods, Moldova's agriculture sector suffers frequent, large-scale disruptions. Yet less than 10 percent of farmland is irrigated, and insurance offerings are inadequate. Despite government subsidies, most policies only cover select hazards like frost or hail and exclude drought, the country’s most damaging threat. Social assistance, such as the Ajutor Social program, also falls short. Only 7 percent of low-income agricultural households are covered, and even then, the support levels are insufficient to mitigate losses. Meanwhile, energy vulnerability has surged. Moldova’s dependence on imported energy, combined with the recent price hikes triggered by Russia’s invasion of Ukraine, has exposed low-income households to intense financial stress. Food prices rose by over 30 percent in 2022, while gas and electricity bills more than doubled. Although the Energy Vulnerability Reduction Fund (EVRF) provided some relief, many poor households remain unable to afford adequate heating or make energy-efficient upgrades due to a lack of funding and awareness.

A Crossroads for Moldova’s EU Aspirations

As Moldova opens accession negotiations with the European Union, the stakes for inclusive development have never been higher. While GDP growth has averaged 4.4 percent over the last two decades, it has not generated the structural transformation needed to ensure prosperity for all. Moldova’s reliance on remittance-fueled consumption must be replaced with a model that fosters employment, boosts rural inclusion, and builds resilience to external shocks. The World Bank’s assessment underscores the need for comprehensive reforms: better transport to connect rural communities to urban jobs, improved access to education and digital infrastructure, stronger social protection mechanisms, and broader adoption of climate-smart agriculture. Moldova has demonstrated political will, especially in responding to humanitarian challenges like the Ukrainian refugee crisis. But the path forward demands long-term investments and bold policymaking. Without systemic reform, the nation risks falling further behind its EU peers, jeopardizing not only convergence goals but the economic future of its most vulnerable citizens.