On the Path to Europe: Why Is Moldova Losing Ground Economically?

With each year of Moldova’s transformation on the path toward European integration, the country’s economy expands in monetary terms. Yet, paradoxically, the opportunities and overall well-being of its citizens continue to diminish

Another request by electricity suppliers to raise tariffs no longer qualifies as a sensation. Our population has grown accustomed to rising electricity prices not merely on an annual basis, but practically every season. The new 7-8% increase is being justified by the extensive use during the winter period of emergency electricity imported from the Romanian power system, which does not have a predictable fixed price on the day of purchase (its cost is determined at the beginning of the following month). Although the final decision rests with the National Agency for Energy Regulation (ANRE), which received the suppliers’ proposal last week, Energy Minister Dorin Junghietu’s remarks that he had warned of a possible tariff increase as early as last year, strongly suggest what ANRE’s verdict will be. Moreover, it is unlikely that the decision will be delayed as long as the anticipated reduction in gas prices; one may assume that the agency will prioritize the increasing the tariff burden for household consumers. The Ministry of Energy and pro-government expert circles will no doubt argue that the rise will be barely noticeable, particularly amid the traditional decline in consumption during the spring months (when heaters are switched off but air conditioners have not yet come into use). For several years now, the “electricity” tariff has quietly incorporated the cost of energy-independence projects driven by the European Union’s requirements for integration into the single energy market. This concerns not only the Vulcanesti-Chisinau power line, but also the future 400 kV infrastructure projects Balti-Suceava and Straseni-Gutinas intended to fully connect Moldova to Romania’s energy system. Romania, notably, has some of the highest electricity prices in the European Union, despite possessing nuclear generation capacity and its own fossil fuel resources. The root of Romania’s difficulties lies in the so-called “climate agenda” and the “green transition”, which require the reduction of traditional generation capacity and the implementation of large-scale projects aimed at cutting emissions, expanding renewable energy, and improving energy efficiency. The financial burden of these measures falls predominantly on households and businesses. Controversy has erupted in Romania over the fact that small-scale renewable energy producers are exempt from paying for grid imbalances, that is, they are compensated for the electricity they feed into the grid even during periods of minimal demand. As a result, tariffs increase on average by €40-50 annually. In Moldova, this sector, driven by small farms and private investors, is expanding at a rapid pace, even outstripping the development of the corresponding legislation and ANRE regulations. Predictably, this will lead to the inclusion of grid balancing costs in the bills of household and industrial consumers as early as this year or the next. An “energy efficiency levy” is also embedded in the excise duties on petroleum – gasoline and diesel imported by companies on both banks of the Dniester. This became known from an interview with Deputy Prime Minister for Reintegration Valeriu Chiveri. The existence of this levy is likely to trigger an increase in fuel prices at least in Transnistria in the coming weeks, unless the sides manage to avoid a dispute over the issue. At the same time, ideas are already being floated in our media space about bringing a number of other payments, beyond fuel excise duties, “up to European standards”, including road charges and vehicle taxes. Excise duties on imported cars and machinery in Moldova are already comparable to those in southern EU countries (with the exception of fully electric vehicles). Now, however, related taxes and fees, not tied to the purchase of a vehicle, but to its daily use, may also increase. If the Chisinau mayor’s office succeeds in implementing even part of its proposed amendments to parking legislation, Moldovan drivers will have to factor in these additional expenses as well. At its core, the narrative of economic growth achieved through the simple mechanism of rising living costs is characteristic of countries aspiring to EU membership or entering the bloc. The European Union’s economic model is marked by high prices, particularly for utilities, transport, education, and healthcare, but also by high wages. If certain segments of industry or other sectors of the national economy fail to meet the Union’s requirements, as was the case in Bulgaria or the Baltic states, they simply wither away – the so-called “collateral damage”. In this sense, the rise in expenses, tariffs, prices, and the overall monetary size of the economy in Moldova negotiating EU membership should come as no surprise. The publication earlier this week of foreign trade statistics only reinforces this view. Exports are growing in Moldova, and imports are expanding at an even more phenomenal pace, leading to a widening trade deficit. As a result, the economy is becoming larger in nominal terms, while the real well-being of the population continues to decline. According to official statistics, exports last year increased to €3.8 billion (up 6.4%). The figures remain modest, roughly five times smaller than those of Latvia, which has a comparable population, and two to three times lower than the monthly exports of a similarly sized Slovenia (Armenia exports 2.5 times more, while largely resource-based Mongolia exports five times as much). At the same time, imports surged by 20.5%, reaching nearly €11 billion and generating a trade deficit of €7.1 billion (an increase of almost one-third over the year). By comparison, Latvia, with total trade volumes of around €43 billion, runs a trade deficit of only about €3.5 billion. Notably, the government is again forecasting an increase in imports this year (around 10%), significantly outpacing the projected growth rate (and especially the physical volumes) of exports. The imbalances that deepened last year were driven by increased food imports amid the crisis in the country’s agricultural sector, the removal of virtually all barriers for goods from the EU and Ukraine, and a significant rise in both the cost and volume of external purchases of gas, fuel, and electricity (in 2024, electricity was purchased primarily from the MoldGRES in Dnestrovsk, which in principle did not affect the country’s foreign trade balance). Even when taking into account external borrowing, remittances from the diaspora, and the surplus in trade in services, the government is clearly failing to stabilize economic processes. On the contrary, political ambitions and commitments to Brussels do little to stimulate economic activity or attract broad-based investment. Ultimately, expenses and tariffs will continue to rise that may prove shocking for the population. As for overall living standards, as was the case in the Baltic states, any tangible improvement may come only years after accession to the EU — and may be felt by relatively few of those who remain in Moldova by that time.