Madagascar, an island country located in the Indian ocean off the coast of southern Africa, is the fifth largest island in the world, with a land mass of 587,000 km² and 25.6 million inhabitants. Despite having considerable natural resources, Madagascar has among the highest poverty rates in the world.
- Presidential elections were held peacefully in January 2019, marking the first political alternation of power since independence in 1960. President Andry Rajoelina won 55.6% of the votes and leads the country alongside Prime Minister Christian Ntsay under the "“Initiative Emergence Madagascar,” aimed at stimulating the economy and reducing poverty. Legislative elections held in May 2019 provided the President’s platform with a majority in the National Assembly, while communal elections in November 2019 and senatorial elections in December 2020 further consolidated the ruling party, with a majority in both houses of Parliament.
- In mid-March 2022, a mini reshuffle of the government was carried out seven months after the last change in August 2021. The positions of Vice-Minister for Reforestation and Vice-Minister for Youth were eliminated. The number of ministerial portfolios is therefore 30 (against 32 before), including 9 women. Five new ministers joined the Cabinet, two ministers changed portfolios and two former ministers are back.
- Development prospects in Madagascar continue to be hampered by the country’s low growth potential and exposure to frequent, deep, and persistent crises. Growth averaged about 3.5 percent from the return to constitutional order in 2013 to the onset of the pandemic and was followed by a recession in 2020 that was about 3 times deeper than in the rest of Sub-Saharan Africa. As a result, the COVID-19 crisis reversed more than a decade of gains in income per capita and pushed the poverty rate to a new record high of 81 percent (international poverty line of $1.90/capita/day). The crisis was compounded in the South of Madagascar by historic droughts that led to widespread crop failure, growing food insecurity, and internal migration.
- Growth had started to recover in 2021 but was interrupted again in 2022 by a third wave of the pandemic followed by a sequence of severe weather events and the adverse effects from the conflict in Ukraine. In particular, more than 450.000 people were affected by four tropical storm systems hitting Madagascar since the start of the year, making it the most disruptive cyclonic seasons since 2008. Russia’s invasion of Ukraine is expected to have important repercussions as well, as it will negatively impact economic prospects in the European Union, which is Madagascar’s main trading partner, and has already led to significant upward pressure on global energy and food prices. This conflict will result in slowing export growth, deteriorating terms of trade and rising inflation in Madagascar. In this context, growth projections for 2022 were downgraded to 2.6 percent (from 5.4 percent previously), which implies that GDP per capita would stagnate and remain about 8.5 percentage points below pre-crisis levels.
- Growth is expected to pick up to 4.2 percent in 2023 and 4.6 percent in 2024, with structural constraints and slowing external demand preventing a faster rebound. The growth potential of the economy has been negatively impacted by deteriorating human capital, private investment and public sector governance during the crisis and is not expected to exceed 4 percent in the short term. Against this backdrop, the poverty rate is projected to remain well above pre-crisis levels. The expected recovery in economic activity will translate into a gradual decline in poverty rates, from an historical high of 81 percent in 2020 to 78.8 percent in 2023 and 77.9 percent in 2024, thereby remaining above pre-crisis levels.
- Fiscal policy was able to play a stabilizing role during the crisis as the government ramped up public spending, but public debt increased significantly, reaching a projected 54 percent of GDP in 2022. Debt distress risks are currently assessed to be moderate, assuming ambitious efforts to boost revenue mobilization and prudent management of public debt and contingent liabilities. The IMF approved in March 2021 a new 40-month Extended Credit Facility (ECF) arrangement amounting to $320 million, which supports reforms to improve tax collection, the composition of public expenditures, and governance. Madagascar also is benefiting from a $233 million SDR allocation from the IMF.
- In the absence of a new drive for reforms, Madagascar risks falling further behind as peers continue to grow faster and demonstrate stronger resilience to shocks. The country would need to sustain significantly higher and more inclusive growth to have a meaningful shot at reducing extreme poverty in coming years. This can only happen if the government kickstarts far-reaching reforms that will enable new investments in sectors that can drive structural transformation and boost job creation, better access to basic services and infrastructure, and greater resilience of vulnerable populations. Several reforms are particularly urgent for the recovery, including accelerating the vaccination campaign; strengthening the response to recent climate shocks; increasing public sector accountability; putting land reforms back on track; and attracting much-needed investment in the power, digital and transport sectors.
Growth remains structurally constrained by inadequate human capital and infrastructure, a high prevalence of informality and self-subsistence agriculture, as well as governance and institutional weaknesses. In the absence of bold reforms, Madagascar might take a decade to revert the loss in average incomes that occurred during the 2020-22 crisis and more than 70 years to reach current living standards in Rwanda, which is Madagascar’s closest aspirational peer.
Human capital in Madagascar ranks among the lowest worldwide: the country has the world’s fourth highest rate of chronic malnutrition, with 40 % of children under five years of age suffering from stunting. In addition, 97% of Malagasy children aged 10 are unable to read and understand a short, age-appropriate text -- 16.2 percentage points lower than the average for sub-Saharan Africa. In primary school, 4 out of 10 children drop out before the last grade. Madagascar has a nascent social protection system covering only 6% of the extreme poor, which is low compared to other countries in the region (28%), and below the national goal of 15% coverage set in the Social Protection National Strategy. Safety net spending is very low 0.3% of GDP, compared to the average of 1.2% of GDP in sub-Saharan Africa.
Living conditions remain difficult for the vast majority of the population, particularly in rural areas and in lagging regions, which continue to fare much worse on child mortality, school attendance, literacy and primary completion rates, malnutrition, life expectancy, access to transport, electricity and potable water. Regions in the South, for instance, experienced a deterioration in their access to water over the last decade and have the highest levels of child mortality with only marginal improvements since 2008.
Madagascar is one of the African countries most severely affected by climate change impacts: An extreme food shortage in southern Madagascar following a drought for the last four years has driven the country to the brink of what experts are calling the world's first “climate change famine.” As of January 2022, 1.64 million people were estimated to be facing acute food insecurity and 30,000 are close to famine conditions, according to the Integrated Food Security Phase Classification. This number is expected to rise as the country enters is regular pre-harvest "lean season.”
Last Updated: Apr 15, 2022