Country Report Madagascar March 2009

Outlook for 2009-10

The president, Marc Ravalomanana, and his ruling party, Tiako-I-Madagasikara (TIM), have been shaken by the political crisis triggered by the confrontation with the mayor of Antananarivo, Andry Rajoelina. Although Mr Ravalomanana is expected to retain a firm grip on power, his unresolved dispute with Mr Rajoelina and rising popular discontent with his government will prolong the political uncertainty and could provide an opportunity for the opposition to rebuild itself. Economic reforms will make slow progress under the 2006-09 poverty reduction and growth facility (PRGF), and the government's attention will focus on securing funding for the poverty-reduction programmes of the Madagascar Action Plan (MAP). New mining exports, strong agricultural growth and ongoing donor inflows will support real GDP growth of 4.2% in 2009 and 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 11.8% of GDP in 2008 to 9.4% of GDP in 2009 and 9.5% of GDP in 2010.

The political scene

The confrontation between Mr Ravalomanana and Mr Rajoelina has triggered a fresh political crisis, resulting in weeks of violent protests, looting and clashes with security forces, and over 125 deaths. After negotiations brokered by the national churches, both sides have agreed not to provoke further confrontations, but tensions remain high.

Economic policy

The government and the IMF have completed their first reviews of the Madagascar Action Plan (MAP), urging greater progress with agricultural reform. However, implementation of the MAP is in doubt after donors threatened to suspend funding for it until their concerns over budget transparency had been addressed. The government has announced plans to reform regulation of the oil sector to remove potential conflicts of interest.

The domestic economy

A project by South Korea's Daewoo Logistics to set up maize and palm oil plantations in Madagascar has provoked fierce controversy. The final phase of construction is nearing completion at Rio Tinto's US$1.2bn ilmenite mining project, which is due to start production in March. However, several other mining investments, notably the US$3.5bn Ambatovy nickel project, are being re-evaluated as a result of lower commodity prices and financing constraints.

Foreign trade and payments

The government has launched a drive to boost exports of cash crops, such as coffee and lychees, in order to reduce the country's dependence on vanilla.

This report covers the following industry codes:
SIC Code: 60;1;10;15;48
NAICS Code: 52;11;212;23;517