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- GDP (PPP):
- $22.3 billion
- 2.4% growth
- 0.6% 5-year compound annual growth
- $970 per capita
- Inflation (CPI):
- FDI Inflow:
Madagascar’s economic freedom score is 61.7, making its economy the 79th freest in the 2015 Index. Its score is unchanged from last year, with improvements in six of the 10 economic freedoms, including property rights, the control of government spending, and monetary freedom, offset by significant deteriorations in trade freedom and investment 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 past five years, Madagascar’s economic freedom has advanced by 0.6 point. Although the country remains in the ranks of the “moderately free,” the absence of committed reforms has undermined overall competitiveness, turned away investors, and eroded the rule of law.
Corruption is pervasive and has contributed to political unrest and a general distrust of the ruling elite. Economic losses from corruption inhibit the development of a strong entrepreneurial environment, a situation that is compounded by inefficient business and labor regulations. Because financial services have not proliferated, the expansion of small businesses and entrepreneurs is stunted.
The former French colony of Madagascar has endured decades of military coups, political violence, and corruption but has stabilized in recent years. Following four years of political stalemate and a mediation process led by the Southern African Development Community, Hery Rajaonarimampianina was elected president in January 2014. In April, Roger Kolo was appointed prime minister, and a new government was established. Following a coup in 2009, international organizations and foreign donors severed ties with Madagascar, but in light of the last election, many have expressed their willingness to normalize economic relations. Madagascar’s economy is largely agricultural. Sitting just off the east coast of Africa, it is highly vulnerable to natural disasters and weather shocks. The World Bank estimates that 92 percent of Malagasy live on less than $2 a day.
After a democratically elected government took office in 2014, the prime minister announced that 40 percent of his country’s budget is lost to graft and pledged to fight it. In June 2014, the Extractive Industries Transparency Initiative reinstated Madagascar’s membership, which had been suspended in the wake of a coup in 2009. The judiciary remains susceptible to corruption and executive influence.
Madagascar’s individual and corporate income tax rates are 20 percent. Other taxes include a value-added tax and a capital gains tax. The overall tax burden is 10.3 percent of domestic output. Government expenditures are equivalent to 13.3 percent of domestic production. Public debt is equal to about 39 percent of gross domestic product.
Previous reforms have reduced the number of days and procedures required to launch a new business, but completing licensing requirements still takes over four months on average. Much of the workforce is employed in the informal sector. In a 2014 IMF agreement, the government pledged to maintain fiscal and monetary discipline and reduce costly fuel price subsidies with better-targeted anti-poverty programs.
Madagascar’s average tariff rate is 9.1 percent. The government relies on tariffs for revenue but maintains few non-tariff barriers. Investors face an unsettled political environment. The financial system includes over 40 credit institutions and 11 banks. There is no stock exchange, and financing for new businesses is not readily available. State-issued treasury bills are used to bridge budget deficits.