(5 minutes read)
· The Malagasy economy has been registering smart growth in two sectors –tourism and mining. Unfortunately, pandemic cast shadows in both sectors bringing them into ground zero
· Yet, the green shoots of development are gradually taking roots in the country
· According to a group of private Malagasy companies, the growth during the year is expected to be close to 5%, if proper government support is forthcoming
The Malagasy economy has been registering smart growth in two sectors –tourism and mining. Unfortunately, pandemic cast shadows in both sectors bringing them into ground zero. Yet, the green shoots of development are gradually taking roots in the country. According to a group of private Malagasy companies, the growth during the year is expected to be close to 5%, if proper government support is forthcoming.
According to the industry group, during 2020, the economy contracted by 3.8 percent, immediately impacting the economic activities of the island nation. For instance, tourism, which directly employs about 45,000 people and supports more than 300,000 in Madagascar had come to a grinding halt on account of the pandemic. The number of tourists dropped down to zero and that continued for more than a year.
Impact on the mining sector, which accounts for 6% of the world’s production, was severe. . The drop in economic activities in Chinese and American markets, main buyers of the mineral products , naturally affected the country. Also, the international prices of raw materials that are mined out from Madagascar dropped phenomenally. The private sector players do not hold the same optimism as that of the government that the economy would bounce back to 5%. They are more aligned to the forecast made by the World Bank and the IMF. The IMF projected a growth rate of 3.2 percent, while the World Bank is more pessimistic, forecasting 2.1 percent.
While maintaining that 5% growth rate is a tall call by the government, the private sector players maintain that it was quite possible to have a significant turnover of around 5 percent, if the authorities adopted a Keynesian stimulus policy with massive investments in infrastructure and agriculture. The country is one of the biggest consumers of rice in the world, the third-largest per capita. But the country is importing 10% of its rice requirements. Once self sufficiency is achieved in the rice production, the country can considerably cut down its import bill, apart from becoming self-sufficient in a very short time.
The private sector agencies point out that the country should invest heavily in infrastructure using debt instruments for mobilizing resources taking advantage of the country’s low external debt. Unlike many African countries, Madagascar is not overburdened with debts. The country’s debt rate is one of the lowest in Africa and stands at nearly 40 percent of GDP, giving space for the country to significantly increase the debt exposure.
The group feels that the ideal route to development is through promotion of micro, small and medium sectors. It feels that the funds for this can be sought from multilateral sources like the World Bank and the IMF.
