Economic situation Hope for stabilisation

In 1960, when Madagascar gained independence from its colonial power, France, the island state was one of the world's middle-income countries. From 1972 onwards, the country charted a socialist course and large companies were nationalised. Madagascar sealed itself off from the Western world, and the country's economic decline began.

In the past few years, growth rates ranged from three to four per cent. In 2020, the COVID-19 pandemic caused a slump in Madagascar's economy, with gross domestic product dropping by 4.2 per cent. The International Monetary Fund (IMF) has predicted economic recovery for 2021.

Agricultural sector: almost exclusively subsistence farming

Madagascar's economy is dominated by agriculture. The sector provides a living for about two thirds of the population but accounts for only around one quarter of gross domestic product. In some regions, promising approaches can be found, for instance the introduction of organic spice cultivation. Germany supports these activities through public-private partnerships (PPPs).

However, most agricultural land is used for subsistence farming. Major challenges include soil erosion and low productivity. Climate change is increasingly exacerbating the situation dramatically. In the 1970s, Madagascar was an exporter of rice, but now rice production is so low that it is no longer sufficient to meet domestic demand. Marketing often fails right at the beginning due to transport problems. Roads are in very poor condition, especially in rural areas. In the rainy season, entire regions are cut off from transport routes and communication networks.

There is also an urgent need to expand power supplies. Nationwide, only some 27 per cent of the people are connected to the power grid. In rural areas, that rate is even lower. At the same time, the government budget is under pressure because high levels of subsidies are provided to the country's largest power supply company. The government has launched the first steps towards reforming the energy sector. Among other things, the use of renewable energy is to be increased on a major scale.

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