Country Report Madagascar June 2009

Outlook for 2009-10

Marc Ravalomanana, and his ruling party, Tiako-I-Madagasikara (TIM), have been driven from power by the former mayor of Antananarivo, Andry Rajoelina, who has assumed leadership of a new transitional authority, Haute Autorite pour la Transition (HAT). However, the HAT has not been recognised internationally, leading to the suspension of aid and Madagascar's expulsion from the African Union (AU) and the Southern African Development Community (SADC). In the meantime economic policy is effectively in limbo, and the government is facing a severe financial crisis caused by the disruption of economic activity and the collapse in aid flows. Nonetheless, new mining exports and agricultural growth will support real GDP growth of 2.8% in 2009 and of 6.2% in 2010. The sharp fall in imports, owing to lower global energy and food prices, will help to reduce the current-account deficit from an estimated 11.7% of GDP in 2008 to 9.1% of GDP in 2009 and to 9.4% of GDP in 2010.

The political scene

Mr Rajoelina has appointed Monja Roindefo as prime minister, and has suspended the TIM-dominated National Assembly and Senate. Mr Roindefo has named his new cabinet, which is notable for the predominance of technocrats, the regional balance of its membership and the absence of political grandees. However, several key posts, notably of agriculture and mines, remain vacant. Talks on agreeing a transitional political pact between the rival parties have so far proved abortive, and both sides have mobilised large street demonstrations.

Economic policy

The HAT faces a severe budgetary crisis, because of the suspension of donor aid, the collapse in tourism revenue and the impact of the downturn in global trade. According to the Banque centrale de Madagascar (BCM, the Central Bank), the ariary lost 9.9% of its nominal value against the US dollar in the first four months of 2009, greatly increasing inflationary pressures.

The domestic economy

South Korea's Daewoo Logistics has abandoned a project to set up maize and palm oil plantations in Madagascar, after strong public objections. However, the HAT is considering a similar project by the Indian agro-industrial group, Varun International. France's Total has announced a five-year programme to drill 130 wells on the Bemolanga tar sands concession that it acquired last September.

Foreign trade and payments

According to data from the IMF's International Financial Statistics, Madagascar's foreign-exchange reserves have fallen sharply in recent months, from a peak of US$1bn at end-September 2008 to US$873.9m at end-February 2009.

This report covers the following industry codes:
SIC Code: 49;1
NAICS Code: 22;11