MADAGASCAR
Table 1

Key conditions andchallenges

2023

Population, million

30.3GDP, current US$ billion

16.5

GDP per capita, current US$545.5

International poverty rate ($2.15)

a80.7
a92.4

a98.2

Lower middle-income poverty rate ($3.65)
Upper middle-income poverty rate ($6.85)
Gini index

a42.6

School enrollment, primary (% gross)b138.2b64.5

Total GHG emissions (mtCO2e)41.8Life expectancy at birth, years

Source: WDI, Macro Poverty Outlook, and official data.
a/ Most recent value (2012), 2017 PPPs.
b/ Most recent WDI value (2021).

Economic growth is estimated to haveremained unchanged at 3.8 percent in
2023 due to sluggish export performance linked to the global economic
slowdown and unfavorable export pricemanagement. It is projected to pick up
to 4.6 percent over 2024-26, driven by
the recovery of international trade andtourism and increased investments inthe telecommunications and mining sectors. The elevated poverty rate is projected to abate slightly. Risks remain
substantial, including fiscal pressures
stemming from state-owned enterprises.

Persistently low economic growth andrapid population growth have resulted in
declining income per capita and a highpoverty rate. Madagascar’s 2023 real GDP
per capita represents only about 56 percent
of its level in 1960. The international poverty rate (US$2.15 per person per day at 2017PPP) has stagnated at around 80 percent
over the past decade, positioning the country among the most impoverished globally. Weak governance, distortionary policies,
and low investment in physical and humancapital have led to low productivity growthand slow structural transformation. Most of
the workforce remains engaged in low-productivity activities, and 80 percent of the
population still relies on agriculture as theirprimary source of income.
Furthermore, Madagascar’s vulnerability
to climate and natural shocks, including
cyclones and droughts, contributes tohigher growth volatility and weighs on potential growth. On average, four cyclones
hit Madagascar each year, damaging infrastructure and agricultural fields, while thesouth is increasingly exposed to drought.
To reduce poverty, Madagascar needs robust and sustained growth, along withimproved resilience to shocks. Sustainedreforms are vital to ensure dependable
and affordable access to infrastructure,develop human capital, and enhance governance. Recent reforms introduced in themining code, telecommunications sector

FIGURE 1 Madagascar / Real GDP growth and contributions
to real GDP growth

licensing, and the investment law could
improve investors’ confidence, paving theway for higher investment and productivity gains. Deepening these reforms andensuring adequate governance and financial sustainability of state-owned enterprises should be prioritized.

Recent developments
Economic growth remained unchanged at3.8 percent in 2023, driven by tourism,
with arrivals nearly doubling from 2022
and high demand for telecommunications
and the food industry. Hence, domestic expenditure has driven growth, while thecontribution to growth from net exports
has been marginal. Although mineral export volumes (nickel, cobalt) have beenmoderately strong and gold export has resumed after suspension in 2020, lower demand and prices for key Malagasy exports
such as textiles, vanilla, and spices havedampened overall export performance.
Inflation has been declining since Q2 2023
due to high base effects related to the fuelprice hike in July 2022 and a tighter monetary policy stance. The central bank increased its deposit and marginal lending
facility rates twice since early 2023 for a cumulative increase of 90 basis points. Concurrently, headline inflation decreased
from a peak of 12.4 percent (yoy) in March2023 to 7.5 percent in December 2023. Core
inflation, which excludes food and energy
price hikes, declined from 7.9 percent inDecember 2022 to 6.3 percent in December
2023. Despite an estimated rise of 8 percentFIGURE 2 Madagascar / Actual and projected poverty rates
and real GDP per capita
Poverty rate (%)

Real GDP per capita (constant LCU)

100

84000090

82000080

80000070

78000060

76000050

74000040

720000302070000010

6800000660000
2010 2012 2014 2016 2018 2020 2022 2024 2026

Source: World Bank.

International poverty rate

Lower middle-income pov. rate

Upper middle-income pov. rate

Real GDP pc

Source: World Bank. Notes: see Table 2.

MPO

1Apr 24in domestic rice production in 2023, rice
prices remained high due to market distortions. Lower international energy prices
have not impacted local prices owing to
the government’s price controls.
The fiscal deficit is estimated to have declined from 6.4 percent of GDP in 2022 to4.9 percent in 2023. The tax-to-GDP ratio isestimated to have increased from 9.5 percent in 2022 to 12.6 percent in 2023, mainly
due to the one-off impact related to the recovery of petroleum tax arrears accumulated in 2022 (equivalent to 1.8 percent ofGDP). Nonetheless, the tax-to-GDP ratio
remains below the 12.9 percent budget target. Government expenditure increasedfrom 17.2 percent of GDP in 2022 to 19.6
percent in 2023 and included a large transfer to the public water and electricity utility, JIRAMA. The budget deficit was mainly
financed by concessional external financing. External and overall public debt distress risks remain moderate.
The current account deficit narrowed from
5.4 percent of GDP in 2022 to an estimated
4.5 percent in 2023, with goods imports declining faster than exports. Despite this improvement, the ariary depreciated by 8.2
percent on average against the US dollarand 11 percent against the euro in 2023.

This depreciation was influenced by highinflation and heightened investor risk
aversion, partly due to uncertainties related to the presidential elections.

Outlook
Growth is expected to accelerate to an average of 4.6 percent over 2024-26, driven
by favorable base effects, enhanced trade
and tourism opportunities, and a new
impetus for private investment following impactful structural reforms in pivotal sectors such as mining, digital technology, and the investment climate. The
potential extension of the United States’
African Growth and Opportunity Act
could positively impact economic activities, particularly investment in the textile
industry. Nevertheless, the poverty rate is
projected to stay at about 79.7 percent in
2024, as job creation is expected to remain
limited compared to population growth.
Hence, about 24.8 million people are projected to remain poor, a number larger than the total population of Burundi
and South Soudan altogether, where thepoverty rates also are very high.

TABLE 2 Madagascar / Macro poverty outlook indicators

The current account deficit is projectedto remain stable at around 4.7 percentof GDP over 2024-26, mainly reflecting
a narrowing goods and services trade
deficit, in line with rising exports frommining and tourism and decreasing crude
oil prices. The current account deficit isexpected to be financed mainly by foreign
direct investments and external financing
for the public sector.
The fiscal deficit is projected to narrow to
an average of 3.1 percent of GDP over2024-26, driven by increased revenue collection, notably from the mineral sector, as
mining projects ramp up production after
the enactment of the new mining code. The
public debt-to-GDP ratio is expected to remain high but sustainable, averaging 57
percent of GDP over 2024-26.
Risks to the outlook include recurring natural hazards, ongoing international conflicts,
and a global economic slowdown. Domestic
downside risks include the financial stressof state-owned enterprises, particularly JIRAMA and Madagascar Airlines, and delay
in implementing key structural reforms.
The enactment of a new mining code and theresumption of major investment projects
represent upside risks that could significantly boost economic growth.

(annual percent change unless indicated otherwise)

Real GDP growth, at constant market prices
Private consumption
Government consumption
Gross fixed capital investment
Exports, goods and services
Imports, goods and services

2021
5.7
3.0
0.2
12.7
55.0
12.7

2022
3.8
2.5
-8.0
-19.1
27.5
19.8

2023e
3.8
2.6
2.3
6.2
2.4
1.7

2024f
4.5
2.9
3.0
7.1
12.6
10.7

2025f
4.6
3.0
3.6
7.5
15.8
14.1

2026f
4.7
3.1
4.0
8.0
16.3
15.1

Real GDP growth, at constant factor prices
Agriculture
Industry
Services

6.5
-1.6
19.7
7.3

3.7
0.9
10.9
3.1

3.8
2.2
7.6
3.4

4.5
2.3
10.2
3.7

4.6
2.3
10.3
3.8

4.7
2.3
10.4
3.9

Inflation (consumer price index)

5.8

8.2

9.9

7.8

7.3

6.9

Current account balance (% of GDP)Net foreign direct investment inflow (% of GDP)

-5.0
1.7-5.4
2.1-4.5
1.6-4.8
2.3-4.7
2.4-4.7
2.5

Fiscal balance (% of GDP)
Revenues (% of GDP)
Debt (% of GDP)
Primary balance (% of GDP)

-2.8
11.1
52.3
-2.2-6.4
10.8
56.9
-5.8

-4.9
14.757.6
-4.0

-3.8
13.3
57.1
-2.9

-3.2
13.5
56.4
-2.2

-2.4
14.1
57.4
-1.6

81.0
92.6
98.2

80.6
92.4
98.1

80.2
92.2
98.1

79.7
91.9
98.0

79.1
91.7
97.9

78.4
91.4
97.8

1.2
11.9

1.3
12.3

1.3
12.1

2.4
12.3

2.8
12.5

2.9
12.8

a,b

International poverty rate ($2.15 in 2017 PPP)a,b
Lower middle-income poverty rate ($3.65 in 2017 PPP)a,b
Upper middle-income poverty rate ($6.85 in 2017 PPP)
GHG emissions growth (mtCO2e)
Energy related GHG emissions (% of total)

Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD.
Notes: e = estimate, f = forecast.
a/ Calculations based on 2012-ENSOMD. Actual data: 2012. Nowcast: 2013-2023. Forecasts are from 2024 to 2026.
b/ Projection using neutral distribution (2012) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU.

MPO2

Apr 24