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- GDP (PPP):
- $21.4 billion
- 1.9% growth
- 1.4% 5-year compound annual growth
- $955 per capita
- Inflation (CPI):
- FDI Inflow:
Madagascar’s economic freedom score is 61.7, making its economy the 79th freest in the 2014 Index. Its score has decreased by 0.3 point from last year, with small declines in labor freedom, freedom from corruption, and control of government spending outweighing modest gains in trade freedom and monetary freedom. Madagascar is ranked 7th out of 46 countries in the Sub-Saharan Africa region, and its overall score is above the world and regional averages.
Over the 20-year history of the Index, Madagascar has improved its economic freedom score by over 10 points. In addition to notable advancements in the areas of rule of law, market openness, and government size, double-digit growth has been recorded in half of the 10 economic freedoms including freedom from corruption, fiscal freedom, financial freedom, property rights, and trade freedom. Once considered “mostly unfree,” Madagascar’s economy has been rated “moderately free” since 2003.
Despite some progress toward much-needed economic development, the combined impact of poor economic management and the ongoing risk of political instability has severely undermined much of the progress made in reducing poverty. The judicial system is underdeveloped, and convoluted administrative procedures facilitate corruption.
Both former President Didier Ratsiraka and opposition candidate Marc Ravalomanana claimed victory in the 2001 elections, and the resulting violence and economic disruption ended only when Ratsiraka fled in 2002. Ravalomanana won a second term in 2006 but stepped down in 2009 after a power struggle with the opposition. Opposition leader Andry Rajoelina seized power with military backing and declared himself president of the High Transitional Authority. A presidential election set for 2012 was postponed until October 2013. Some donors have suspended aid, and the African Union and Southern African Development Community have suspended Madagascar’s membership. The political crisis has discouraged investors and contributed to economic stagnation.
Pervasive corruption remains a major problem as repercussions continue to be felt in the wake of the 2009 coup. In 2011, the Extractive Industries Transparency Initiative suspended Madagascar. The judiciary is susceptible to corruption and executive influence. The coup highlighted institutional weaknesses, and subsequent judicial decisions were tainted by frequent intimidation. Enforcement of contracts cannot be guaranteed.
The top individual income and corporate tax rates have fallen to 20 percent. Other taxes include a value-added tax (VAT) and a capital gains tax. The overall tax burden amounts to 11.1 percent of gross domestic income. Public expenditures are 16 percent of GDP. Public debt is around 38 percent of gross domestic income. Cuts in aid flows in recent years have put pressure on public spending.
Launching a business has become more straightforward, but licensing requirements still take over three months and cost more than 10 times the level of average annual income. The labor market remains poorly developed. Inflation has averaged 10 percent over the most recent three years. The government’s maintenance of fiscal and monetary discipline is coming under increasing political pressure.
Madagascar’s average tariff rate is 6.1 percent, and there are relatively few non-tariff barriers to trade. The unstable political climate deters investment. Less than 5 percent of the population has access to comprehensive financial services. The relatively high costs of financing and scarce access to credit are barriers to private-sector development. Capital markets remain underdeveloped, and there is no stock market.