ANTANANARIVO, July 31, 2018 – Overall, the economy has been performing well, with growth estimated at 4.2 % in 2017 and projected at 5.0 % in 2018, according to the latest edition of the World Bank’s Madagascar Economic Update, released today.
The report looks at the recent economic developments and presents medium-term outlook for the country. It indicates that there are numerous drivers of growth, including increased demand for transport services, a profitable banking sector and strong performance of goods and services produced in economic processing zones, contributing to solid export earnings and the accumulation of reserves.
However, despite this rather robust macro-economic performance, the poor were hit by unfavorable weather conditions which resulted in a contraction in the agriculture sector, where the production of domestically produced rice fell, and prices soared. These events contributed to an increase in food inflation in 2017, directly eroding the purchasing power of the poor. Year-on-year inflation peaked at 9 % at end 2017. Inflationary pressures have started to ease in the first quarter of 2018, largely due to improvements in the supply of domestically produced rice.
“While the economy is projected to continue expanding over the medium-term, focusing on inclusive growth is essential for poverty reduction,” said Coralie Gevers, World Bank Country Manager for Madagascar. “This positive macroeconomic outlook, conditioned by the pursuit of economic and fiscal reforms and a stable political environment, provides opportunities to reduce poverty.”
The projected growth of the economy means that the proportion of the Malagasy population living under the poverty line is likely to decrease. The poverty headcount, based on $1.90 a day line is projected to lower from 75 % in 2018 to 73 % in 2020.
A special focus section of this Economic Update discusses financial inclusion. Over the past years, mobile money has been expanding to increase access to financial services for individuals and firms. These opportunities provide a means for safely storing money, as well as increasing access to other services such as credit in times of crisis and insurance to prepare for bad days.
A new National Strategy for Financial Inclusion (2018- 2022) is under preparation with the objective of increasing the number of adults with access to formal financial services from 29 % in 2016 to 45 percent in 2022