2014 Index of Economic Freedom

Madagascar

overall score61.7
world rank79
Rule of Law

Property Rights40.0

Freedom From Corruption27.3

Limited Government

Government Spending92.3

Fiscal Freedom90.8

Regulatory Efficiency

Business Freedom62.8

Labor Freedom43.9

Monetary Freedom77.6

Open Markets

Trade Freedom77.8

Investment Freedom55.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 22.4 million
  • GDP (PPP):
    • $21.4 billion
    • 1.9% growth
    • 1.4% 5-year compound annual growth
    • $955 per capita
  • Unemployment:
  • Inflation (CPI):
    • 6.5%
  • FDI Inflow:
    • $894.7 million
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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.

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Background

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.

Rule of LawView Methodology

Property Rights 40.0 Create a Graph using this measurement

Freedom From Corruption 27.3 Create a Graph using this measurement

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.

Limited GovernmentView Methodology

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.

Regulatory EfficiencyView Methodology

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.

Open MarketsView Methodology

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.

Country's Score Over Time

Bar Graph of Madagascar Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Madagascar to other economic country groups

Regional Ranking

rank country overall change
1Mauritius76.5-0.4
2Botswana721.4
3Cape Verde66.12.4
4Rwanda64.70.6
5Ghana64.22.9
6South Africa62.50.7
7Madagascar61.7-0.3
8Swaziland61.24.0
9Zambia60.41.7
10Uganda59.9-1.2
11The Gambia59.50.7
12Namibia59.4-0.9
13Burkina Faso58.9-1.0
14Gabon57.80.0
15Tanzania57.8-0.1
16Côte d'Ivoire 57.73.6
17Kenya57.11.2
18Benin57.1-0.5
19Seychelles56.21.3
20Djibouti55.92.0
21Mali55.5-0.9
22Malawi55.40.1
23Senegal55.4-0.1
24Niger55.11.2
25Mozambique 550.0
26Nigeria54.3-0.8
27Guinea53.52.3
28Mauritania53.20.9
29Cameroon52.60.3
30Liberia52.43.1
31Burundi51.42.4
32Comoros51.43.9
33Guinea-Bissau51.30.2
34Sierra Leone50.52.2
35Ethiopia500.6
36Togo49.91.1
37Lesotho49.51.6
38São Tomé and Príncipe 48.80.8
39Angola47.70.4
40Central African Republic46.7-3.7
41Chad44.5-0.7
42Equatorial Guinea44.42.1
43Republic of Congo 43.70.2
44Democratic Republic of Congo40.61.0
45Eritrea38.52.2
46Zimbabwe35.56.9
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