ABOUT THIS COUNTRY
Madagascar, officially the Republic of Madagascar, and previously known as the Malagasy Republic, is an island country in the Indian Ocean, approximately 400 kilometres off the coast of East Africa across the Mozambique Channel. At 592,800 square kilometres Madagascar is the world’s second-largest island country.
If the pandemic subsides during the first half of 2021, the outlook is favorable for a return to growth, with real GDP projected to grow 3.5% in 2021 and 4.5% in 2022. But the impact of the crisis will continue to be felt in public finances in 2021. The financing needed for economic recovery was estimated at $820 million in 2021, resulting in a budget deficit of 4.6% of GDP in 2021, which would narrow to 3.8% in 2022. On the demand side, the recovery should be supported by a rebound in both public and private investment and a resumption of exports—nickel, cobalt, and vanilla—as the global economy and international trade recover. However, the current account deficit is expected to remain high at 5% of GDP in 2021 and 4.5% in 2022. Job losses estimated at 27% in the formal sector are expected to gradually decline in 2021 as the economy recovers. The main risks to the outlook are a new wave of COVID–19 infections and weather shocks, such as drought, cyclones, and floods.
Reasons to invest in Madagascar:
- Abundant natural resources (gemstones, industrial and decorative stones, oil, and rare metals for mining activities; a big and fertile land with a favourable climate)
- Low cost of local inputs and labour
- The strategic location between Asia and Africa
- Improving business environment
- Political stability since 2009
- Developing tourism sector
- Public debt mainly on concessional terms
- Incentives to export-driven companies with export processing zone status
Agriculture
Mining
Textiles
Agriculture
- Agriculture, including fishing and forestry, is Madagascar’s largest industry and employs 82% of its labor force. Madagascar’s varied climate, ranging from tropical along the coasts, moderate in the highlands and arid in the south, allows for the cultivation of tropical crops such as rice, cassava, beans and bananas. In 2011, agricultural products—especially cloves, vanilla, cacao, sugar, pepper, and coffee—accounted for Madagascar’s top twelve exports by value. Madagascar produces the largest vanilla harvest in the world and Malagasy vanilla accounts for 80-85% of the global vanilla market.
Mining
- A small but growing part of the economy is based on mining of ilmenite, with investments emerging in recent years, particularly near Tulear and Fort Dauphin. Mining corporation Rio Tinto Group started production at its Fort Dauphin mine in January 2009, following several years of preparation. The mining project is highly controversial, with Friends of the Earth and other environmental organizations filing reports to detail their concerns about the mine’s effect on the environment and local communities. Gemstone mining is also an important part of Madagascar’s economy.
- Several major projects are underway in the mining and oil and gas sectors that, if successful, will give a significant boost. In the mining sector, these include the development of coal at Sakoa and nickel near Tamatave. The Ambatovy nickel mine (Sherrit International 40%, Sumitomo 27.5%, Korea Resources 27.5%, SNC-Lavalin 5%) is a huge operation and has cost US$4.76 million to date and is due to start production in 2011. In oil, Madagascar Oil is developing the massive onshore heavy oil field at Tsimiroro and ultra heavy oil field at Bemolanga.
Textiles
- Exports from Madagascars’ Export Processing Zones, located around Antananarivo and Antsirabe, account for the majority of garment exports and are largely exempt from customs restrictions in the United States under the African Growth and Opportunity Act (AGOA) and in the European Union under the Everything But Arms (EBA) agreement.
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