Country Risk Rating

A very uncertain political and economic outlook and a business environment with many troublesome weaknesses can have a significant impact on corporate payment behavior. Corporate default probability is high. - Source: Coface

Business Climate Rating

The business environment is difficult. Corporate financial information is often unavailable and when available often unreliable. Debt collection is unpredictable. The institutional framework has many troublesome weaknesses. Intercompany transactions run major risks in the difficult environments rated C.


  • Large mineral reserves (nickel, gold, titanium, cobalt and precious stones)
  • Agricultural potential: world's largest producer of vanilla
  • Positive development of tourism before the pandemic (tourism share: 16.1% of GDP in 2019)
  • External public debt mainly in the form of concessional loans (93% of total in 2021)



  • Dependence on agriculture/livestock (25% of GDP in 2020); vulnerable to terms of trade fluctuations.
  • Vulnerable to climatic hazards and natural disasters
  • High poverty, with 79% of the population living below the extreme poverty line of USD 1.90 per day
  • High dependence on foreign aid
  • Inadequate road, water and electricity networks (only 27% of people had access to electricity in 2019)
  • High corruption, Madagascar is ranked 147 out of 180 countries with a score of 26/100 in Transparency International's Corruption Perceptions Index 2021
  • Chronic political instability (crises in 1972, 1991, 2002 and 2009)


Current Trends


Plunged in 2020 into one of the worst recessions in its history by the Covid-19 pandemic, the economy recovered slowly in 2021-22. It remains dependent on the evolution of the virus, with a vaccination rate of less than 6% in September 2022 (the third wave observed at the beginning of 2022) and has been affected by several violent climatic episodes (five tropical storms in just one month at the beginning of 2022, solid and persistent drought in the south of the island), as well as by the inflationary shock linked to the war in Ukraine. In 2023, growth is expected to accelerate, although it will remain below the pre-COVID-19 pace. The country will continue to benefit from high prices for nickel, cobalt, cloves, and vanilla, and consumption is expected to strengthen after being impacted by the COVID-19 crisis and weather episodes. Furthermore, growth is expected to be driven by increased capital spending. The construction of new road infrastructure, the development of water supply, and investments in the energy and mining sectors should be carried out within the Plan Emergence Madagascar (PEM) framework, financed by both public actors, primarily international partners, and private entities. The Island Games, which bring together the islands of the Indian Ocean every four years, will be held on the island and should lead to the construction and renovation of sports infrastructure. However, although direct trade links with Russia and Ukraine are limited (around 0.6% of Madagascar’s trade), the war in Ukraine will continue to weigh on the country, as the import bill will continue to be burdened by high energy and food prices, the recovery of the tourism sector hampered by international uncertainties, and demand for exports - particularly textiles - weakened by the slowdown in external demand, especially from the European Union, which receives 32% of Madagascar’s exports. In this context, inflation, which reached a record level in 2022 due to the rise in energy and food prices, is expected to remain high and continue to weigh on the purchasing power of households. Although the central bank has raised its key rate several times since 2021, bringing it to 8.9% at the beginning of August 2022, potential persistent inflation could lead to further increases, weighing on private investment. Moreover, a second-round effect could be felt linked to the rise in real wages in the public sector (which should average 17% in 2022). However, inflation should remain below its 2022 level, as the government has shown its willingness to contain consumer prices, notably by capping prices on certain essential goods (rice, sugar, flour). The economy remains very dependent on the evolution of COVID-19, as the vaccination rate is still meager, and on the occurrence of new climatic episodes.



The structural deficit in trade in goods and services explains the current account deficit. Investment needs are high, while domestic savings capacity is low, as is manufacturing capacity. In 2023, it will remain important, albeit shrinking, given the persistence of high import prices, sluggish external demand, expatriate remittances squeezed by host countries’ economic situation, and lower-than-expected tourist flows. The deficit will continue to be financed by international aid and foreign direct investment. Reserves will remain at an adequate level, above four months of imports.

The budget deficit, which has widened since 2020, will narrow slightly owing to the revenues generated by more robust growth but will remain high. The measures implemented by the government to limit the impact of inflation on the population and businesses will continue with the prospect of the presidential election at the end of 2023. In particular, public sector wage increases are expected to raise the wage bill by 0.9% of GDP. Due to the sharp rise in their production costs, the government will continue to provide financial transfers to fuel distributors and the national company JIRAMA, which provides the island’s water and electricity supply, to reduce their net liabilities and limit fiscal risks. As part of hosting the 2023 Island Games, the Ministry of Youth and Sports budget will increase significantly. Deficit financing will continue to rely on multilateral and bilateral project loans and local banks. Public debt will remain high but stable and sustainable, as it is overwhelmingly composed of concessional loans.



The presidential election will take place in November 2023. It will thus open the door to the position currently held by Andry Rajoelina, who was elected in 2018 and whose presidency has been strongly contested by part of the population, mainly because of his management of the pandemic and the lack of fundamental reforms to improve the country’s governance and its development prospects. This election, which should confirm Andry Rajoelina’s hold on power thanks to his mastery of the state machinery, could exacerbate tensions and the country’s fragility in a complicated social context with growing political polarisation. The government is plagued by extreme poverty, expected to remain at nearly 80% until 2024, almost double the average for sub-Saharan Africa and still above the pre-crisis level. Unemployment is increasingly high. Due to years of underinvestment and a long period of severe drought, Madagascar is experiencing one of the worst food crises in its history. Food insecurity could increase in the coming years due to the island’s vulnerability to more frequent violent climatic events and the economy’s heavy dependence on the agricultural sector. Moreover, despite establishing an anti-corruption system, enforcement of anti-corruption policies remains limited.


Coface (11/2022)