2022 Index of Economic Freedom

Madagascar

OVERALL SCORE58.9
WORLD RANK98
Rule of Law

Property Rights40.3

Judicial Effectiveness33.4

Government Integrity23.0

Government Size

Tax Burden90.7

Government Spending92.9

Fiscal Health87.8

Regulatory Efficiency

Business Freedom37.4

Labor Freedom56.0

Monetary Freedom75.9

Open Markets

Trade Freedom64.8

Investment Freedom55.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 27.7 million
  • GDP (PPP):
    • $44.1 billion
    • -4.2% growth
    • 2.3% 5-year compound annual growth
    • $1,599 per capita
  • Unemployment:
    • 1.9%
  • Inflation (CPI):
    • 4.2%
  • FDI Inflow:
    • $359.0 million

Madagascar’s economic freedom score is 58.9, making its economy the 98th freest in the 2022 Index. Madagascar is ranked 12th among 47 countries in the Sub-Saharan Africa region, and its overall score is above the regional average but below the world average.

Madagascar registered sporadic economic growth from 2017 through 2019 and then suffered a contraction in 2020. Growth resumed in 2021. During those five years, economic freedom scores were generally on the low side but somewhat erratic. With score increases in property rights and judicial effectiveness outpacing a decline in business freedom, Madagascar has recorded a 1.5-point overall gain of economic freedom since 2017 and remains in the upper half of the “Mostly Unfree” category. Fiscal health is greatly improved, but trade freedom has deteriorated, and government integrity is abysmal.

IMPACT OF COVID-19: As of December 1, 2021, 967 deaths had been attributed to the pandemic in Madagascar, and the government’s response to the crisis ranked 148th among the countries included in this Index in terms of its stringency. The economy contracted by 4.2 percent in 2020.

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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. His ruling coalition gained a majority in the lower house in 2019 and a majority in the upper house in 2020. 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 such as cyclones are frequent.

Rule of Law

Property Rights 40.3 Create a Graph using this measurement

Judicial Effectiveness 33.4 Create a Graph using this measurement

Government Integrity 23.0 Create a Graph using this measurement

Property rights and interests are poorly respected because of corruption and the lack of material and technological resources. The registration system is cumbersome, complicated, and unreliable. The slow and inefficient judiciary lacks independence in practice and is perceived as corrupt. There is pervasive corruption in the police, tax authorities, customs, land administration, and many commercial sectors. Anticorruption efforts are weak.

Government Size

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 11.4 percent of total domestic income. Government spending has amounted to 15.4 percent of total output (GDP) over the past three years, and budget deficits have averaged 2.3 percent of GDP. Public debt is equivalent to 43.6 percent of GDP.

Regulatory Efficiency

The 2019 Plan Emergence de Madagascar aspires to revive business activity, but it lacks policy focus and transparency. Enforcement of contracts is lax. Labor laws, including those regulating child labor, are poorly upheld. The state funds subsidies in such key sectors as aviation, public utilities (water and electricity), ports, hotels, insurance, finance, mining, maintenance, and ship construction.

Open Markets

Madagascar has one preferential trade agreement in force. The trade-weighted average tariff rate is 10.1 percent, and 17 nontariff measures are in effect. The investment regime’s inefficiency and lack of transparency curtail prospects for dynamic growth in new investment. The relatively high cost of financing is a barrier to entrepreneurial growth in the private sector, particularly for small and medium-size firms.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Mauritius70.9-6.1
2Cabo Verde66.72.9
3Botswana64.8-2.8
4Côte d'Ivoire61.6-0.1
5Seychelles61.1-5.2
6Benin611.4
7São Tomé and Príncipe60.34.4
8Senegal602.0
9Ghana59.80.6
10Tanzania59.5-1.8
11Namibia59.2-3.4
12Madagascar58.91.2
13Burkina Faso58.31.8
14The Gambia58-0.8
15Togo57.2-0.3
16Rwanda57.1-11.2
17South Africa56.2-3.5
18Mali55.90.3
19Gabon55.8-2.3
20Mauritania55.3-0.8
21Djibouti55.3-0.9
22Niger54.9-2.4
23Nigeria54.4-4.3
24Uganda54.2-4.4
25Guinea54.2-2.3
26Malawi530.0
27Cameroon52.9-0.5
28Kenya52.6-2.3
29Angola52.6-1.6
30Sierra Leone520.3
31Eswatini51.4-3.7
32Mozambique51.3-0.3
33Comoros50.4-5.3
34Chad49.8-0.6
35Ethiopia49.6-2.1
36Zambia48.7-1.7
37Republic of Congo48.5-2.2
38Lesotho48.1-5.4
39Liberia47.9-1.3
40Democratic Republic of Congo47.6-1.4
41Equatorial Guinea47.2-2.0
42Guinea-Bissau46-8.9
43Central African Republic45.7-3.1
44Eritrea39.7-2.6
45Burundi39.4-10.5
46Zimbabwe33.1-6.4
47Sudan32-7.1
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