In early 2023, two severe tropical storms hit Madagascar, submerging many roads, and flooding and destroying schools and health centers. Rising staple goods'' prices – amplified by the impact of Russia''s invasion of Ukraine on the prices of imported products – fueled inflation, which reached 11.4 percent year-on-year in January 2023.
Economic activity remained robust in 2023, with growth estimated at 4.4%, up from 4.3% in 2022. Growth was driven by extractive industries (up 5.2%), tourism (up 14.6%), and telecommunications (15.2%) on the supply side and by buoyant exports and booming public investment (12.2% of GDP in 2023, up from 5.4% in 2022) on the demand side.
Madagascar has enjoyed sustained economic growth over the last four years. Increasing from 2.3% in 2013 to an estimated 4.2% in 2017, GDP growth has steadily improved and is projected to reach 5% in 2018. Since 2015, the most important driver of growth has been the services sector, which is characterized by a small but dynamic private sector.
Main Sectors of Industry. Madagascar is the leading exporter of vanilla in the world. Agriculture, including fishing and forestry, accounts for 21.9% of GDP and employs 70% of the population according to World Bank data (even though the majority of inhabitants practice subsistence farming).
Increasing from 2.3% in 2013 to an estimated 4.2% in 2017, GDP growth has steadily improved and is projected to reach 5% in 2018. Since 2015, the most important driver of growth has been the services sector, which is characterized by a small but dynamic private sector. Year-on-year growth of the services sector was estimated at 5.2% in 2017, and is projected at 5.4% in 2018. One component of the services sector that is performing particularly well is trade, which increased by 4.1% in 2017 and is projected to grow by 4.5% in 2018.
Approximately 80% of the population is engaged in agricultural activities. Between 2014 and 2017, the agricultural sector contracted by an average of 0.8%, suggesting that the positive benefits of recent economic growth is not being felt by the rural population and that are not experiencing significant improvements in their living conditions.
The agricultural sector is constrained by low productivity due to the minimal use of modern farming techniques, lack of connectivity to markets to facilitate the transportation of goods, and high vulnerability to climatic fluctuations. Rural households have minimal off-farm income generating activities to help buffer the impact of weather shocks.
Projected at 5.4% in 2019, growth remains on the upswing over the medium term. Monetary policy should continue working to control inflation which is estimated at 6.4% in 2019 and is projected to average around 5.4 to 6.0% over the 2020 to 2022 period. Over the medium-term, public expenditures are expected to remain steady, but with a tendency to evolve toward lower current spending and higher capital expenditures.
Around 40% of the Malagasy population currently have access to a mobile phone. As the country develops, the demand for mobile phones and the potential customer base to be served by a financial system also increases. The report highlights that a lack of available income to purchase a mobile phone does not necessarily present a barrier to using mobile money. A solution for clients who aren''t able to buy a phone is the purchasing of a less expensive SIM card. Customers can then use cash-in-cash-out services through the use of a mobile phone owned by a mobile money agent.
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About Madagascar industry and market trends
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