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The COVID-19 pandemic halted four years of economic growth in Madagascar. After real GDP growth of 4.41t/yr in 2019, the country entered a recession in 2020 when real GDP declined by 4.1t/yr. Manufacturing, mining, and services were particularly hard hit due to lockdown measures, while agriculture performed well. The crisis also put pressure on the financial sector, leading the central bank to inject liquidity into the system.
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Prices were kept in check, however. Inflation was 4.21% of GDP in 2020, compared to 5.6% in 2019. The current account deficit deteriorated to 3.51% of GDP in 2020, compared to 2.31% in 2019, due to the decline in exports, the abrupt halt to tourism, and the decline in foreign direct investment (FDI).
The recovery is expected to be supported by a rebound in public and private investment and a recovery in exports, such as nickel, cobalt and vanilla, as the global economy and international trade recover.
With a low tax revenue-to-GDP ratio, Madagascar may, according to the AfDB, need to focus on increased revenue mobilization to support the financing of economic recovery and to preserve the long-term sustainability of its debt.
GDP: USD 13.65 billion (Source: IMF – World Economic Outlook Database, 2020)
GDP (annual growth at constant prices): 0.4% (Source: IMF – World Economic Outlook Database, 2020)
GDP per capita: USD 491 (Source: IMF – World Economic Outlook Database, 2020) State debt: 47.51% of GDP (Source: IMF – World Economic Outlook Database, 2020) Inflation rate: 5.5% (Source: IMF – World Economic Outlook Database, 2020) A stable inflation rate of 6.2% in 2021 is forecast in the 2021 finance law. Achieving this objective depends in particular on the effects induced by the rise in the price of oil, the outlook for global economic growth forecast for 2021 and the limited depreciation of the national currency, the ariary, valued on average at 3,936.7 against the dollar in 2021.
Economic assets
– Growth above the African average before the pandemic,
– A quality workforce,
– Unique natural resources,
– Products on the high-end market (fine cocoa, vanilla, Label Rouge shrimp, malossol caviar, etc.)
– The fastest internet connection in Africa,
– Significant mineral reserves (precious stones, nickel, cobalt) and oil,
– Great potential in agribusiness and organic farming, the world’s leading producer of vanilla, the world’s second largest producer of lychee, and the leading producer of African caviar,
– Sustainable public debt because it is mostly concessional (70% of the total).
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General framework
Before the coronavirus pandemic, the Malagasy economy was on a markedly upward trajectory. After a long period of political instability and economic stagnation, momentum had accelerated over the past five years, reaching an estimated growth rate of 4.8% in 2019, a level not seen in ten years.
By helping to restore investor confidence, reopen access to export markets, resume concessional financing and launch structural reforms, the return to constitutional order and the peaceful political transition during the last elections have played a decisive role in this recovery.
These positive trends have also resulted in an improvement in the situation on the labour market and a reduction in poverty.
In 2020, as in all countries affected by the pandemic (COVID-19), the economic, social and budgetary impact resulted in a very clear decline in activity. The economic growth rate was set at 4.5% in 2021, compared to a negative real growth rate (-3.8%) in 2020, although the estimate in the Amending Finance Act (LFR 2020) had set this growth at 0.8%. The government is thus counting on strong growth to achieve this colossal objective of making up nearly 7 points of growth rate.
The evolution of Foreign Direct Investment (FDI)
With the implementation of Madagascar's development plan, the legal and economic reforms that followed, and the increased openness to foreign investment (FDI), investing in Madagascar has become attractive. This large island in the middle of the Indian Ocean benefits from abundant natural resources and offers numerous investment opportunities in a wide variety of sectors: minerals, tourism, and agriculture. The 2021 Finance Act provides for an investment rate of 22.8% in 2021, compared to 17.8% in 2020. The State is thus focusing on structuring public investments, particularly in basic infrastructure.
Land acquisition by investors
The Investment Law grants foreign companies the right to acquire land and real estate under certain conditions. For investors, land acquisition can be carried out through a long-term lease of 18 to 99 years, renewable, transferable and convertible for foreigners, and full ownership for nationals.
Investment Protection
Madagascar has signed Foreign Investment Promotion and Protection Agreements with several countries (Canada, Mauritius, France, Germany, China, etc.). These agreements establish a legal framework for foreign investment, covering both rights and responsibilities. Malagasy law recognizes the right to private property, and expropriation can only be carried out within the framework of the law with appropriate compensation.
Tax incentives
Companies engaged in exporting can apply for Export Free Zone status to obtain the benefits outlined in Law 2007-037. In other sectors, tax incentives are set out in the Tax Orientation Act adopted by Parliament and apply to all companies. For large-scale investments, any investor can contact the administration to negotiate specific tax benefits.

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