Madagascar is the world’s fifth largest island, situated in the Indian Ocean off the coast of southern Africa. Despite considerable natural resources, however, its population of about 28 million (2020) has one of the world’s highest poverty rates.
Political Context
President Andry Rajoelina and Prime Minister Christian Ntsay have led the country since January 2019. Legislative elections held in May 2019 gave the president’s party a majority in the National Assembly, while communal elections in November 2019, and senatorial elections in December 2020, further consolidated the ruling party’s hold, resulting in majorities in both houses of Parliament.
A government reshuffle was carried out in late February 2023. The government has 30 ministers, including 10 women. Madagascar’s next presidential elections are scheduled for November 2023 (first round).
Economic Situation
Progress on the development objectives articulated in the Madagascar Plan for Emergence, which guides the socio-economic development of Madagascar, remains slow as productivity, driven by poor structural transformation, is contributing negatively to growth. Moreover, Madagascar continues to face major economic and social challenges, exacerbated by exogenous shocks. Economic growth reached 5.7% in 2021 despite the COVID-19 pandemic and multiple climatic shocks exacerbating Madagascar's fragility. This rebound from a 7.1% contraction in 2020 is mainly due to a recovery in the mining, services, and construction sectors. However, poverty remains elevated and on the rise in urban areas, reflecting the impact of rural-urban migration, the lack of employment opportunities in the cities, and a decline in the productivity of private enterprises.
In 2022, growth is estimated to decelerate to 3.8% reflecting mostly the impact of repeated natural disasters compounded by a deteriorating global context. In early 2023, two severe tropical storms hit Madagascar, submerging many roads, flooding and destroying schools and health centers. Moreover, recent evidence indicate that repeated cyclones increased the poverty rate among affected households by 27%. Real GDP growth is projected to improve to 4.2% in 2023 and to accelerate to about 5% in 2024-25 mostly boosted by a recovery of mining industry coupled with gradual reopening of the air traffic, especially with South Africa.
Rising food and energy prices, exacerbated by the indirect impact of the war in Ukraine on the prices of imported goods, have fueled inflation, which reached 10.9% (y/y) in December 2022, eroding household purchasing power and exacerbating already high poverty levels, especially in urban areas.
The fiscal deficit is estimated to have risen to 3.1% of GDP in 2022 from 2.8% in 2021 due to a disagreement with oil distributors and the delayed payment of oil customs taxes and total public debt rose. However, the fiscal balance will improve in 2023 and beyond as a result of the implementation of planned reforms for more efficient spending and domestic revenue mobilization.
The current account deficit is estimated to have increased to 5.6% of GDP in 2022 (from 5% of GDP in 2021), as a recovery in mineral exports is offset by higher imports of refined petroleum products, food, and intermediate goods. Gross international reserves declined, but remained broadly adequate, from 5.9 months of imports in 2021 to 5.0 months of imports in 2022.
Last Updated: Mar 24, 2023
