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MADAGASCAR
Economic Freedom Score
25
World Rank:
79
Regional Rank:
7
Least
free 0
adagascar’s economic freedom score is 61.7, making its
M
economy the 79th freest in the 2015 Index. Its score is
unchanged from last year, with improvements in six of the
50
75
Most
100 free
61.7
Freedom Trend
64
10 economic freedoms, including property rights, the control
of government spending, and monetary freedom, offset by
significant deteriorations in trade freedom and investment
freedom. Madagascar is ranked 7th out of 46 countries in the
Sub-Saharan Africa region, and its overall score is above the
world and regional averages.
Over the past five years, Madagascar’s economic freedom
has advanced by 0.6 point. Although the country remains in
the ranks of the “moderately free,” the absence of committed reforms has undermined overall competitiveness, turned
away investors, and eroded the rule of law.
Corruption is pervasive and has contributed to political
unrest and a general distrust of the ruling elite. Economic
losses from corruption inhibit the development of a strong
entrepreneurial environment, a situation that is compounded
by inefficient business and labor regulations. Because financial services have not proliferated, the expansion of small
businesses and entrepreneurs is stunted.
BACKGROUND: The former French colony of Madagascar
has endured decades of military coups, political violence, and
corruption but has stabilized in recent years. Following four
years of political stalemate and a mediation process led by the
Southern African Development Community, Hery Rajaonarimampianina was elected president in January 2014. In April,
Roger Kolo was appointed prime minister, and a new government was established. Following a coup in 2009, international
organizations and foreign donors severed ties with Madagascar, but in light of the last election, many have expressed their
willingness to normalize economic relations. Madagascar’s
economy is largely agricultural. Sitting just off the east coast
of Africa, it is highly vulnerable to natural disasters and
weather shocks. The World Bank estimates that 92 percent of
Malagasy live on less than $2 a day.
How Do We Measure Economic Freedom?
See page 475 for an explanation of the methodology
or visit the Index Web site at heritage.org/index.
63
62
61
60
2011
2012
2013
2014
2015
Country Comparisons
Country
61.7
World
Average
60.4
Regional
Average
54.9
Free
Economies
84.6
0
20
40
60
80
100
Quick Facts
Population: 23.0 million
GDP (PPP): $22.3 billion
2.4% growth in 2013
5-year compound annual growth 0.6%
$970 per capita
Unemployment: 3.8%
Inflation (CPI): 5.8%
FDI Inflow: $837.5 million
Public Debt: 38.4% of GDP
2013 data unless otherwise noted.
Data compiled as of September 2014.
301
MADAGASCAR (continued)
THE TEN ECONOMIC FREEDOMS
Score
RULE OF
LAW
Country
World Average
Property Rights 45.0
Freedom from Corruption 28.0
0
20
40
60
80
Rank
1–Year
Change
66th
132nd
+5.0
+0.7
100
After a democratically elected government took office in 2014, the prime minister announced
that 40 percent of his country’s budget is lost to graft and pledged to fight it. In June 2014, the
Extractive Industries Transparency Initiative reinstated Madagascar’s membership, which had
been suspended in the wake of a coup in 2009. The judiciary remains susceptible to corruption
and executive influence.
Fiscal Freedom 90.9
GOVERNMENT
Government Spending 94.7
SIZE
28th
1st
0
20
40
60
80
+0.1
+2.4
100
Madagascar’s individual and corporate income tax rates are 20 percent. Other taxes include a
value-added tax and a capital gains tax. The overall tax burden is 10.3 percent of domestic output. Government expenditures are equivalent to 13.3 percent of domestic production. Public
debt is equal to about 39 percent of gross domestic product.
REGULATORY
EFFICIENCY
Business Freedom 62.3
Labor Freedom 45.1
Monetary Freedom 79.2
99th
153rd
61st
0
20
40
60
80
–0.5
+1.2
+1.6
100
Previous reforms have reduced the number of days and procedures required to launch a new
business, but completing licensing requirements still takes over four months on average. Much
of the workforce is employed in the informal sector. In a 2014 IMF agreement, the government
pledged to maintain fiscal and monetary discipline and reduce costly fuel price subsidies with
better-targeted anti-poverty programs.
OPEN
MARKETS
Trade Freedom 71.8
Investment Freedom 50.0
Financial Freedom 50.0
123rd
109th
70th
0
20
40
60
80
–6.0
–5.0
0
100
Madagascar’s average tariff rate is 9.1 percent. The government relies on tariffs for revenue
but maintains few non-tariff barriers. Investors face an unsettled political environment. The
financial system includes over 40 credit institutions and 11 banks. There is no stock exchange,
and financing for new businesses is not readily available. State-issued treasury bills are used
to bridge budget deficits.
Long-Term Score Change (since 1995)
RULE OF LAW
Property Rights
Freedom from
Corruption
302
+15.0
+18.0
GOVERNMENT
SIZE
Fiscal Freedom
Government
Spending
+16.2
+6.8
REGULATORY
EFFICIENCY
Business Freedom
Labor Freedom
Monetary Freedom
2015 Index of Economic Freedom
OPEN MARKETS
–7.7
–3.8
+5.2
Trade Freedom
+34.2
Investment Freedom
0
Financial Freedom +20.0