2021 Index of Economic Freedom

Madagascar

OVERALL SCORE57.7
WORLD RANK112
Rule of Law

Property Rights33.7

Judicial Effectiveness25.7

Government Integrity20.2

Government Size

Tax Burden90.6

Government Spending93.4

Fiscal Health92.9

Regulatory Efficiency

Business Freedom46.5

Labor Freedom44.7

Monetary Freedom73.7

Open Markets

Trade Freedom65.4

Investment Freedom55.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 27.0 million
  • GDP (PPP):
    • $52.9 billion
    • 4.8% growth
    • 4.1% 5-year compound annual growth
    • $1,714 per capita
  • Unemployment:
    • 1.8%
  • Inflation (CPI):
    • 5.6%
  • FDI Inflow:
    • $227.3 million

Madagascar’s economic freedom score is 57.7, making its economy the 112th freest in the 2021 Index. Its overall score has decreased by 2.8 points, primarily because of a decline in judicial effectiveness. Madagascar is ranked 17th among 47 countries in the Sub-Saharan Africa region, and its overall score is above the regional average but below the world average.

This year, Madagascar’s economy sank back into the ranks of the mostly unfree, which is not encouraging for a country that is among the poorest in the world. To achieve greater economic freedom, the government would have to reduce the fiscal risks of its state-owned electricity and water utilities, strengthen the rule of law, make the labor market more flexible, and establish political stability.

IMPACT OF COVID-19: As of December 1, 2020, 251 deaths had been attributed to the pandemic in Madagascar, and the economy was forecast to contract by 3.2 percent for the year.

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Background

Madagascar, a former French colony, has been rocked by military coups, political violence, and corruption for decades. In 2014, after years of instability, Hery Rajaonarimampianina was elected president, and international donor assistance was resumed. In 2018, protests against proposed changes in the election law forced the prime minister to resign. Andry Rajoelina, a former president installed by a coup, reclaimed the presidency in a December 2018 runoff election, and his ruling coalition gained a majority in May 2019 legislative elections. Madagascar produces 80 percent of the world’s natural vanilla. Agriculture, forestry, and fishing are economic mainstays. Interruptions in the power supply caused by deficient infrastructure and natural disasters like cyclones are frequent.

Rule of LawView Methodology

Property Rights 33.7 Create a Graph using this measurement

Judicial Effectiveness 25.7 Create a Graph using this measurement

Government Integrity 20.2 Create a Graph using this measurement

Madagascar has continued French colonial land tenure policies with presumed state ownership of all land and central government control of all land titles. The judiciary is subject to executive influence and corrupt, slow, and inefficient. High levels of corruption exist in nearly all sectors including the police, tax authorities, customs, land administration, trade, mining, industry, environment, education, and health care.

Government SizeView Methodology

The top individual income and corporate tax rates are 20 percent. Other taxes include value-added and capital gains taxes. The overall tax burden equals 11.9 percent of total domestic income. Government spending has amounted to 14.8 percent of total output (GDP) over the past three years, and budget deficits have averaged 1.6 percent of GDP. Public debt is equivalent to 38.4 percent of GDP.

Regulatory EfficiencyView Methodology

Business freedom remains significantly repressed. Construction permitting has become more complex and expensive. Few reliable labor statistics are available. The worst forms of child labor persist, and many workers experience very poor working conditions. According to the IMF, no fuel subsidies have been paid by the government since implementation of the revised fuel price structure in June 2019.

Open MarketsView Methodology

Madagascar has one preferential trade agreement in force. The trade-weighted average tariff rate is 9.8 percent, and 14 nontariff measures are in effect. Judicial and regulatory barriers deter foreign investment. State-owned enterprises distort the economy. Less than 20 percent of adult Malagasies have access to an account with a formal banking institution. In 2020, mandatory deposit limits were eased to encourage banks to defer delayed loan payments.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Mauritius772.1
2Rwanda68.3-2.6
3Botswana67.6-2.0
4Seychelles66.32.0
5Cabo Verde63.80.2
6Namibia62.61.7
7Côte d'Ivoire61.72.0
8Tanzania61.3-0.4
9South Africa59.70.9
10Benin59.64.4
11Ghana59.2-0.2
12The Gambia58.82.5
13Nigeria58.71.5
14Uganda58.6-0.9
15Gabon58.11.4
16Senegal580.0
17Madagascar57.7-2.8
18Togo57.53.4
19Niger57.32.6
20Guinea56.50.0
21Burkina Faso56.5-0.2
22Djibouti56.23.3
23Mauritania56.10.8
24São Tomé and Príncipe55.9-0.3
25Comoros55.72.0
26Mali55.6-0.3
27Eswatini55.1-0.2
28Kenya54.9-0.4
29Guinea-Bissau54.91.6
30Angola54.22.0
31Lesotho53.5-1.0
32Cameroon53.4-0.2
33Malawi530.2
34Sierra Leone51.73.7
35Ethiopia51.7-1.9
36Mozambique51.61.1
37Republic of Congo50.78.9
38Chad50.40.2
39Zambia50.4-3.1
40Burundi49.90.9
41Equatorial Guinea49.20.9
42Liberia49.20.2
43Democratic Republic of Congo49-0.5
44Central African Republic48.8-1.9
45Eritrea42.33.8
46Zimbabwe39.5-3.6
47Sudan39.1-5.9
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