CHISINAU (Reuters) - The government-backed candidate in Moldova's presidential race withdrew on Wednesday, saying it was a tactical move to ensure the presidency remained in pro-European hands.

The frontrunner ahead of Sunday's election is pro-Russian candidate Igor Dodon, who wants to hold a referendum on the ex-Soviet nation's Association Agreement with the EU.

On Wednesday government choice Marian Lupu said he would step aside to boost the chances of fellow pro-Western candidate Maia Sandu. Sandu last week told Reuters that a split among pro-European politicians could harm Moldova.

"This is a tactical decision. Moldova needs a pro-European president. Polls show she (Sandu) is more favored," Lupu told journalists.

The president in Moldova is more than just a figurehead - he or she can return laws to parliament, dissolve the assembly in certain situations and appoint the prime minister.

Moldova embarked on its pro-EU course in 2009 despite its reliance on Russian energy supplies. Russia retaliated by banning its farm exports, including wine and apples, that are a major source of income for Moldovans.

The nation of 3.5 million people, sandwiched between Ukraine and EU member Romania, is reeling from a banking scandal last year involving the looting of one billion dollars, the equivalent of an eighth of economic output. The case highlights the scale of corruption in Europe's poorest nation, where the average monthly family income is below $300.

(Reporting by Alexander Tanas; writing by Alessandra Prentice; editing by Matthias Williams)