Economic Outline

Economic Indicators

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. Real per capita income has fallen 60% since 1975. The international poverty rate (USD 2.15, 2017 PPP) is 80%, while multidimensional poverty stands at 69%, the fifth highest globally. Madagascar has struggled to capitalise on its commodity exports for structural transformation, with low-productivity agriculture remaining the dominant sector. Growth was driven by extractives, construction, and public works, but these were hit hardest by COVID-19 (World Bank). After growing by 4.2% in 2023, growth was estimated at 4.2% in 2024 too, with an expected increase to 4.6% in 2025, gradually reaching its 5% potential in the medium term. This growth will be driven by anticipated rises in agricultural production, improvements in mining and textiles, and strong performance in key tertiary sectors such as transport, construction, tourism, and telecommunications (IMF).

Concerning public finances, the primary deficit is estimated at 2.6% of GDP in 2024, following the near-complete repayment of oil customs tax arrears. Beyond 2024, the primary deficit is expected to stay below 3.0% of GDP, with efforts to mobilise domestic revenue allowing for increased public investment and social spending. The public debt-to-GDP ratio was revised down from 55.6% to 52.7% at end-2023 due to a reduction in JIRAMA's (the state-owned electric utility and water services company) domestic debt. Public debt is projected to peak at 54.2% in 2028 and then decline to 52.2% by 2034, in line with the goal to keep debt below 60% (IMF). Headline and core inflation reached 8.6% and 8.5% year-on-year in December 2024, up from 7.3% and 8% in March 2024. Food and energy price inflation persisted due to Cyclone Gamane and the depreciation of the ariary since April. Supply-side constraints, including poor road infrastructure and unreliable electricity, have increased transport and production costs, contributing to the rise in core inflation. In response, the central bank (BFM) raised the deposit facility and marginal lending rates by 50 basis points to 9.5% and 11.5%, respectively, in August 2024, and increased the reserve requirement ratio from 12% to 15% in November 2024 (IMF).

The World Bank estimated the unemployment rate in Madagascar in 2023 at 3.1% of the total active population, but Madagascar’s living conditions remain among the lowest in the world. Malagasy people have a low life expectancy due to poor living conditions, particularly in matters of sanitation and hygiene. In addition, the country remains extremely vulnerable to climate shocks, such as hurricanes, floods, locust infestations, and public health crises. The IMF estimated the country’s GDP per capita (PPP) at only USD 1,989 in 2024, one of the lowest globally.

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