- Capital: Antananarive
- Region: Southern Africa
- Official languages: Malagasy and French
- Independence Day: June 26, 1960
- Area: 587,041 sq km
- Population (2018): 26.3 million
- REC membership: COMESA, SADC
- WTO membership: November 17, 1995
- GDP (2018): US$ 13.853 billion
- GNI per capita (2018): US$ 510
- Currency: Malagasy ariay
Real GDP growth in 2019 is estimated at 5.2%. The primary sector, with 22.4% in 2019, is driven by traditional agriculture, greatly exposed to the effects of climate change (droughts, cyclones). In a shifting environment, exporting companies (extractive industries in an export processing zone) drove the secondary sector’s contribution up from 18.5% in 2015 to 21.3% in 2019. There was no significant change in the tertiary sector (growth of 0.8 point), the largest in the economy, with 58% of GDP in 2019, but driven by the least productive sectors, where informal activities are concentrated (trade, transport).
Public finances improved with increased tax collection to reach an estimated 12.2% of GDP in 2019, up from 10.5% in 2015. Although public investment spending rose steadily, from 3.5% of GDP in 2015 to 8.3% in 2019, it remains inadequate to meet infrastructure requirements.
The budget deficit, 1.5% of GDP in 2018, rose to 2.4% in 2019 and is expected to climb to 4.1% in 2020 and 4.9% in 2021. The current account, after a surplus of 0.8% of GDP in 2018, shifted to a deficit of 0.2% in 2019, and is expected to widen to 1.5% in 2020 and 2.4% in 2021. The risk of external debt overhang, moderate in 2015, moved to low in 2019, according to the IMF. Inflationary pressures remained strong between 2015 and 2019, reaching a high of 8.6% in 2018, and gradually falling to 6.2% in 2019.
Real GDP growth is projected at 5.3% in 2020 and 5.1% in 2021, driven by public and private investments in infrastructure (port, airport, roads, energy).
To support public investment, a high priority should be to mobilize more government revenue. Prudent monetary policy has consolidated the central bank’s gross official reserves (4.3 months of imports in 2019 compared with 2.4 months in 2015). Inflation should also lessen, to 6.1% in 2020 and 5.8% in 2021.
To support monetary policy and consolidate foreign trade, the authorities should focus on promoting import substitution industries for food products and intermediate goods. The most structured and productive subsectors in services (telecommunications, banks, and insurance) are still underdeveloped (4% of GDP in 2019) but have been increasingly dynamic. Greater support for them could promote greater growth and the creation of decent jobs over the next few years.
A more open African market through regional integration could become an outlet for food surpluses, as long as there is infrastructure to improve access and facilitate trade.
The country is vulnerable to external shocks, specifically a drop in nickel and vanilla prices and a rise in the prices of oil and imported goods. The economy remains heavily dependent on imported goods (food and intermediate products, oil products), which represent more than 71% of imports.
The strongest value-added export commodities (vanilla, cloves, cocoa beans) are grown on small farms, and the food industry remains underdeveloped (barely 2% of GDP), with almost no progress in recent years. Public policies have not eased the structural constraints on the sector (lack of roads, financing, energy), the insecurity in production areas, or the difficult access to land and financing.
Almost 80% of the population works in agriculture based on subsistence crops (rice, cassava, corn), and jobs in the sector are mainly low paying, with considerable underemployment. The poverty rate in agriculture was 86.4% in 2013.
Last updated: April 2020