Marina Solovieva, Program Director for Economic Policy at Expert-Grup
The fact that the monetary and multidimensional poverty indicators are evolving in different directions (monetary poverty is increasing, while multidimensional poverty is decreasing) has sparked a public debate on the validity of statistical methods. The NBS was criticized by politicians for the allegedly “wrong” methodology of calculating monetary poverty.
In fact, there is nothing wrong with the methodology. The two indicators don’t necessarily move in the same direction because they measure different things. While absolute poverty statistics measure the financial ability of households to provide themselves with a minimum standard of living considered decent in a particular society, multidimensional poverty indicators measure households’ access to a number of basic elements of modern life: health care, education, good housing, and decent employment. The former speaks more to people’s personal financial capabilities, the latter more likely to depend on investments made by the state in health care, education, etc.
The group most affected by monetary poverty is those with low levels of education: 73% of those with primary education and 51% of those with incomplete secondary education are categorized as poor. Based on this, it is possible to draw conclusions about the determinants of monetary poverty. These are, first of all, low level of education, which is directly related to low labor productivity and limited prospects in the labor market, which leads to low earnings. In all subsequent cases – inadequate support for large families, regional differences, low level of pensions, etc. are not determinants.
I would like to emphasize the importance of education in explaining poverty – 61% of working-age Moldovans have a level of education that is little demanded by employers, which keeps them in poverty. At the same time, census data show that only 2% of the population aged 24+ continue to study. Continuous education, new skills in demand on the labor market, thus become the main guarantee against poverty in personal terms.
As for recommendations to the authorities, it is necessary to stimulate the acquisition of knowledge, coverage of complete secondary and specialized education, adequately support large families, and create conditions for development.
The average disability pension should be increased by at least 15% – up to the subsistence level (3050 lei in the first half of 2025). And also to set the minimum wage at 50% of the average wage, in accordance with the EU Directive 2022/2041 on minimum adequate wages in the European Union (which in Moldova should be about 8000 lei per month, as requested by the trade unions). Otherwise, it turns out that we want to go to Europe, but somehow, “at a preferential rate”, without observing the European norms.
The question arises: where will we get the money for all the necessary measures to overcome poverty? Funds for infrastructure projects for regional and local development can be obtained from the EU within the Growth Plan for Moldova, as well as from other development partners, such as the World Bank. To finance other expenditures, we will have to revise the fiscal policy.
In particular, a review of preferential tax regimes is long overdue: under the IMF program, the government committed itself to broaden the tax base and review unjustified tax exemptions for businesses, in order to increase annual budget revenues by at least 900 million lei. It is this point of the program that has not been implemented. The program ended in October, but it is still worthwhile to revise the unjustified privileges anyway. It is also necessary to continue fighting tax evasion and the informal economy.
In addition, it is time to consider a return to progressive income taxation, and raising the standard tax rates on personal income and corporate profits. I can directly see how tense the business community is right now, so I am not saying that taxes should be raised right now. But we should at least start thinking in this direction, because our standard income tax rate is much lower than in most other European countries. Because of this, the tax system does not fulfill its redistributive function.
In addition, our property taxes are extremely low, or rather, the tax base is understated due to frequent cases of incorrect property valuation (not at market price). In the first half of 2025, budget revenues from property taxes amounted to about 1% of total tax revenues for the same period, while the EU average is 4-5%.
At the same time, it is not recommended to increase VAT, as it was done recently in Romania and got the opposite effect. Such a measure would be counterproductive from a social point of view, as it would increase inflationary pressure and disproportionately affect low-income groups (high-income groups do not spend all their income, but save and therefore do not pay VAT on all income received).
