2019 Index of Economic Freedom

Madagascar

overall score56.6
world rank114
Rule of Law

Property Rights33.2

Government Integrity14.3

Judicial Effectiveness24.4

Government Size

Government Spending91.8

Tax Burden91.0

Fiscal Health85.5

Regulatory Efficiency

Business Freedom47.3

Labor Freedom44.6

Monetary Freedom72.4

Open Markets

Trade Freedom69.2

Investment Freedom55.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 25.6 million
  • GDP (PPP):
    • $39.7 billion
    • 4.1% growth
    • 3.4% 5-year compound annual growth
    • $1,551 per capita
  • Unemployment:
    • 1.8%
  • Inflation (CPI):
    • 8.1%
  • FDI Inflow:
    • $389.1 million

Madagascar’s economic freedom score is 56.6, making its economy the 114th freest in the 2019 Index. Its overall score has decreased by 0.2 point, with declines in scores for trade freedom and government integrity exceeding improvements in judicial effectiveness, fiscal health, and labor freedom. Madagascar is ranked 15th among 47 countries in the Sub-Saharan Africa region, and its overall score is above the regional average but below the world average.

Madagascar is endowed with bountiful untapped natural resources and a mostly market economy, but it has not developed a capital market. The combination of a weak judicial system, convoluted administrative procedures, poor enforcement of contracts, and rampant government corruption impairs the business environment. The judicial system is underdeveloped. Improved financial governance would help the enforcement of laws against money laundering and strengthen supervision of the banking sector.

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Background

Madagascar, a former French colony, has been rocked by military coups, political violence, and corruption for decades. After years of instability, Hery Rajaonarimampianina was elected president in 2014, and international donor assistance resumed. In 2018, protests against proposed changes in the election law forced Prime Minister Olivier Mahafaly Solonandrasana to resign. Former President Andry Rajoelina, who had overthrown former President Marc Ravalomanana in a 2009 coup, competed with him to succeed Rajaonarimampianina in a December 2018 runoff. Agriculture, forestry, and fishing are economic mainstays, but southern Madagascar is still recovering from sustained drought that brought about widespread hunger in 2016. Interruptions in the power supply caused by deficient infrastructure and natural disasters like cyclones are frequent.

Rule of LawView Methodology

Property Rights 33.2 Create a Graph using this measurement

Government Integrity 14.3 Create a Graph using this measurement

Judicial Effectiveness 24.4 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. It is also corrupt, slow-moving, and inefficient. High levels of corruption exist in nearly all sectors, including the police, tax, customs, land, 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 10.1 percent of total domestic income. Over the past three years, government spending has amounted to 16.6 percent of the country’s output (GDP), and budget deficits have averaged 2.7 percent of GDP. Public debt is equivalent to 37.3 percent of GDP.

Regulatory EfficiencyView Methodology

The overall climate for entrepreneurial activity is held back by a lack of political will for reform. Procedures for setting up a business have been simplified, but other regulatory requirements are generally costly. Labor regulations are outmoded, restrictive, and not conducive to development of a dynamic labor market. Despite some reforms, subsidies to the state-owned Jirama public power utility continue to drain public finances.

Open MarketsView Methodology

The combined value of exports and imports is equal to 74.5 percent of GDP. The average applied tariff rate is 7.9 percent. As of June 30, 2018, according to the WTO, Madagascar had 11 nontariff measures in force. Judicial and regulatory barriers deter foreign investment. State-owned enterprises distort the economy. About 18 percent of adult Malagasies have access to an account with a formal banking institution.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Mauritius73-2.1
2Rwanda71.12.0
3Botswana69.5-0.4
4Cabo Verde63.13.1
5Côte d'Ivoire 62.40.4
6Seychelles61.4-0.2
7Tanzania60.20.3
8Uganda59.7-2.3
9Burkina Faso59.4-0.6
10Namibia58.70.2
11South Africa58.3-4.7
12Mali58.10.5
13Ghana57.51.5
14Nigeria57.3-1.2
15Madagascar56.6-0.2
16Senegal56.30.6
17Gabon56.3-1.7
18Mauritania55.71.7
19Guinea55.73.5
20Comoros55.4-0.8
21Benin55.3-1.4
22Kenya55.10.4
23Eswatini54.7-1.2
24São Tomé and Príncipe 540.4
25Guinea-Bissau54-2.9
26Ethiopia53.60.8
27Zambia53.6-0.7
28Lesotho53.1-0.8
29Cameroon52.40.5
30The Gambia52.40.1
31Niger51.62.1
32Malawi51.4-0.6
33Angola50.62.0
34Democratic Republic of Congo50.3-1.8
35Togo50.32.5
36Chad49.90.6
37Liberia49.7-1.2
38Central African Republic49.1-0.1
39Burundi48.9-2.0
40Mozambique 48.62.3
41Sudan47.7-1.7
42Sierra Leone47.5-4.3
43Djibouti47.12.0
44Equatorial Guinea41-1.0
45Zimbabwe40.4-3.6
46Republic of Congo 39.70.8
47Eritrea38.9-2.8
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