Madagascar: Madagascar Economy Profile

The still-sluggish economy grew slightly faster (2.6%) in 2013 (1.9% in 2012) thanks mostly to mining and should speed up in 2014 (3.7%) and 2015 (5.4%) as the political situation normalises.

• Madagascar took an extra step towards recovery from its five-year political crisis by holding presidential and parliamentary elections in the last quarter of 2013, opening the way to renewed international acceptance and revival of economic and social development.
• The country's participation in world price chains is still small despite its a lot of assets, such as tourism, a free zone for textile factories, ICT-related services and natural resources (agriculture and mining).

The country's political crisis since 2009 is still hampering economic and social evolution. Economic increase of 1.9% in 2012 and 2.6% in 2013 was unimpressive against the International Monetary Fund's estimated sub-Saharan average of 5.1% and an annual national people increase of 2.8%. It was mainly driven by extractive industries, agro-industry, banking, transport, livestock and fisheries. Macroeconomic stability was maintained by drastic budgetary adjustments that undermined the government's ability to provide basic services and as well held back economic recovery.

The budget deficit deteriorated to 3% of gross domestic product (GDP) from 1.3% in 2012. The current account deficit was held at 8.8% of GDP (close to its 8.3% price in 2012). Inflation rose to 6.9% from 5.8% in 2012. If the political situation normalises next the December 2013 presidential and parliamentary elections, increase could improve in 2014 to a projected 3.7% and in 2015 to 5.4%, largely due to agriculture, agro-industry, extractive industries, tourism and construction.

Sluggish and poorly-distributed increase has not improved living conditions for most people and has damaged efforts to achieve the Millennium Development Goals (MDGs) by 2015. A country wide 2012/13 survey of MDG evolution showed additional than 70% of Madagascans (inclunding 77% in the countryside) lived below the national poverty line. Underemployment is particularly high for young people and the crisis has made jobs precarious for 81% of the workforce, particularly women in rural areas.

Although world price chains (GVCs) are an opportunity for the economy to expand, Madagascar's participation is limited to exporting unprocessed goods and selling imported goods to consumers. The country does have a lot of assets - tourism, a free zone for textile manufacturing, ICT-related services and natural resources in agriculture and mining. To participate fully in GVCs, it must end recurrent political unrest, fight corruption strongly, train the workforce and improve infrastructure.