Madagascar flag Madagascar: Economic and Political Overview

The economic context of Madagascar

Economic Indicators

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Despite being rich in natural resources, Madagascar is among the poorest countries in the world. Political instability, weak institutions and poor governance have been impediments to the country's economic growth. After the recession induced by the COVID-19 pandemic in 2020, economic growth rebounded to 4.3% in 2021 and 4.2% in 2022 (IMF). According to IMF forecast, GDP growth is projected to further accelerate to 5.2% in 2023 and 2024, driven by high prices for nickel, cobalt, cloves and vanilla, consumption and increased capital spending (Coface). Risk factors that can affect growth include social fragility, fiscal imbalances and vulnerability to external shocks.

After experiencing one of the worst recessions in its history due to the Covid-19 pandemic, Madagascar’s economy recovered slowly in 2021-22. The country’s fragility was aggravated by multiple climate shocks (several storms and a drought) as well as by the inflationary pressures linked to the war in Ukraine. The latter lead to an increase in the import bill, a delayed recovery of the tourism sector and a reduced demand for exports (Coface). Inflation soared from 5.8% in 2021 to 9.8% in 2022, and it is expected to remain high in 2023 (8%) and 2024 (7.5%) (IMF). The central bank raised its key rate several times, and the government decided to cap prices on certain essential goods (rice, sugar, flour) (Coface). Fiscal deficit deteriorated from -2.9% GDP in 2021 to -6.5% GDP in 2022, and it is expected to remain high despite decreasing to -4.8% GDP in 2023 and -4.7% GDP in 2024 (IMF). Public debt slightly increased from 53.1% GDP in 2021 to 53.8% GDP in 2022, and while remaining high, it is expected to stay stable at 53.1% GDP in 2023 and 53.6% GDP in 2024 (IMF). As it is almost exclusively concessional, it is considered sustainable. In March 2021, the IMF and Malagasy authorities agreed on a medium-term program of about USD 320 million under the Extended Credit Facility (ECF). This program aims at supporting recovery, preserving macroeconomic stability, rebuilding fiscal space and advancing reforms. The overall program performance is mixed, as reforms remain hampered by limited capacity and weak governance (IMF). The 2023 budget envisages gradual fiscal consolidation. The authorities are also committed to pursue the delayed Madagascar Emergence Plan 2019/2023, that aims to stimulate the country's economic growth through an increase in public and private investments, the strengthening of human capital and the improvement of governance. Among the country's persistent socio-economic challenges are poverty, corruption and the infrastructure deficit.

The ILO estimates the unemployment rate in Madagascar in 2021 at 2.3% of the total active population, but Madagascar’s living conditions remain among the lowest in the world. According to the World Bank, poverty concern more than 80% of the population, as the pandemic worsened the situation. The ongoing famine in the South of the country is a major concern. Malagasy people have a low life expectancy due to poor living conditions, particularly in matters of sanitation and hygiene. According to WaterAid Madagascar, around 70% of the population does not have access to adequate sanitation and around 90% of Malagasy people do not have access to improved toilets. As a result, there is a high risk of the spread of major infectious diseases among the population. More than half of the country's children suffer from a serious form of malnutrition. In addition, the country remains extremely vulnerable to climate shocks, such as hurricanes, floods, locust infestations and public health crises. The south of the country faces security concerns due to armed robbery of livestock.

Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 15.1515.7616.7718.3319.76
GDP (Constant Prices, Annual % Change)
GDP per Capita (USD) 523530548583611
General Government Gross Debt (in % of GDP)
Inflation Rate (%) n/a10.
Current Account (billions USD) -0.82-0.62-0.80-0.88-0.96
Current Account (in % of GDP) -5.4-3.9-4.8-4.8-4.9

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

Madagascar is the leading exporter of vanilla in the world. Agriculture, including fishing and forestry, accounts for 24.7% of GDP and employs 64% of the population according to World Bank data (even though the majority of inhabitants practice subsistence farming). The main crop is rice, grown on almost half of the agricultural land. The main other agricultural products are: coffee, sugar cane, cloves, cocoa, cassava, beans, bananas, peanuts and livestock products. The agricultural sector is limited by low productivity due to the minimal use of modern agricultural techniques, the lack of infrastructure and a great vulnerability to climatic fluctuations, but benefits from numerous ongoing investments aimed at meeting these challenges. Deforestation and erosion, compounded by excessive use of firewood, are of serious concern.

The industrial sector contributes 19.5% of GDP and employs 9% of the active population (World Bank). It is dominated by mining (precious stones including rubies, sapphires, emeralds, etc.), textiles and agro-industry. Other business sectors include soap making, glassware, cement, automotive assembly, paper and petroleum.

The tertiary sector contributes to 50.4% of the GDP and employs 27% of the active population. Trade performed well before the global economic slowdown (with growth of around 5% per year), as well as tourism, which is one of the main assets of the country and whose potential is still untapped.

Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 73.9 10.4 15.7
Value Added (in % of GDP) 22.4 22.4 48.0
Value Added (Annual % Change) 0.9 7.4 -4.8

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.


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Indicator of Economic Freedom


The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

World Rank:
Regional Rank:

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation


Country Risk

See the country risk analysis provided by Coface.

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Latest Update: January 2024

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