Madagascar Economic Update, December 2020 : Setting a Course for Recovery
Prior to the pandemic, Madagascar was on sustained recovery path and achieved progress in poverty reduction. The economic revival in the period leading up to the COVID-19 (coronavirus) crisis was supported by political and economic stability, renew...
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| Format: | Report |
| Language: | English |
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World Bank, Washington, DC
2020
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| Online Access: | http://documents.worldbank.org/curated/en/726431608065032400/Madagascar-Economic-Update-Setting-a-Course-for-Recovery http://hdl.handle.net/10986/34935 |
| Summary: | Prior to the pandemic, Madagascar was on
sustained recovery path and achieved progress in poverty
reduction. The economic revival in the period leading up to
the COVID-19 (coronavirus) crisis was supported by political
and economic stability, renewed investor confidence, rising
integration in key export markets, growing flows of
concessional financing and structural reforms. Activity
continued to gain strength up until 2019, as public and
private sector investments accelerated, while moderate
inflation helped support real income and consumer spending.
At the same time, budget and current account deficits
remained moderate and the currency stabilized in real
effective terms. In this context, growth reached 4.4 percent
in 2019, its fastest pace in over a decade, with
export-oriented sectors such as textiles, mining, and
tourism performing particularly well in the run-up to the
crisis. Tourism revenues were bolstered by a 19 percent
increase in visitor arrivals, reaching a decade high of
375.000. In the primary sector, favorable weather conditions
have contributed to a bumper rice harvest and significant
gains in agricultural production more generally. The
COVID-19 pandemic triggered a sudden and deep recession,
reversing nearly a decade of prior income per capita gains.
The combined impact of global trade disruptions and domestic
containment measures is estimated to have resulted in a GDP
contraction of -4.2 percent in 2020, similar to that
observed during the devastating 2009 constitutional crisis.
Considering a pre-crisis projection of 5.2 percent in 2020,
this means that income per capita would be 9.4 percent lower
than expected at the start of the year, erasing all gains
achieved since the return to constitutional order in 2013.
On the demand side, a sharp drop in exports was the key
driver of the decline in activity, while public consumption
and investment played a buffeting role. The COVID-19 crisis
was an external shock of unprecedented magnitude. The
contraction in global activity in 2020, currently estimated
at -4.4 percent, would be by far the most severe and
broad-based on records, with output shrinking in more than
90 percent of countries around the world, against 83 percent
during the great depression in 1930, and 60 percent during
the great recession 2009. In the Euro Area—Madagascar’s
largest export destination—output is estimated to contract
by 7.4 percent. As the global toll of the pandemic continues
to increase, millions of people are suffering from
diminished prospects and disrupted livelihoods. In the
developing world, falling income per capita in the vast
majority of countries will interrupt poverty reduction
trends and could tip over more than 100 million people into
extreme poverty. |
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