Before the health crisis in Madagascar, economic growth was on an upward trend, reaching a rate of 4.4% in 2019. In fact, before the COVID-19 pandemic, Madagascar's economy was expanding for six consecutive years with a growth estimated at more than 5% yearly. In 2020, the rate of unemployment was estimated at 1.9% of the working population. The informal sector is the main provider of employment in Madagascar and the multidimensional poverty rate is at 70.3% with an estimated poverty intensity of 54.9% . Madagascar has experienced a long-term decline in incomes as one of the only countries in the world, whereby the country is 41 percent poorer today than it was at independence in 1960. Unacceptably, it is estimated that 77.6 percent of the population live below the US $1.90 poverty line, at purchasing power parity. Human capital in Madagascar is on a declining trend, thus investments in human capital is needed for the labour force is to be able to access quality jobs to escape poverty .
Madagascar is characterized by the richness and diversity of its natural resources. The country has 1.14 million kilometres of exclusive economic zone and more than 5,500 kilometres of coastline covering 13 coastal regions. Fishery resources, coral reefs, mangroves, coastal marshes, and coastal forests are of major socio-economic interest for the country . In 2014, the total wealth of Madagascar was estimated at 6500 USD per inhabitant, nearly 36% of which is provided by natural capital. Renewable natural resources (farmland, grazing and protected areas) are crucial as they on their own accounted for 92% of the total value of the natural capital stock .
The opportunities in terms of green economy relate to the enormous possibilities for sustainable fishing and agriculture, aquaculture, ecotourism, and coastal development. Madagascar's commitment to exploit its natural resources potential could make the country a pioneer in promoting the development of the green economy .
Madagascar's major development challenge is to adapt and mitigate the impacts of climate change and the slow structural transformation of its economy, which prevents the country from achieving more inclusive and shared growth. The development challenges are compounded by several underlying pressures such as limited access to infrastructure (roads, electricity, etc.) and poor modernization and sustainability of key economic sectors, agriculture and fisheries which are very vulnerable to the effects of climate change (drought, floods, etc.).
Key policies and governance approach
As part of the Madagascar Emerging Plan (PEM) 2019-2023, Madagascar aims to become the breadbasket of the Indian Ocean and beyond with its large swaths of agricultural lands, forest areas, and access to the sea. Madagascar aims to achieve its objective of Zero hunger by 2023 by producing at least 500,000 tonnes of rice per year . This objective is however very ambitious, given the current level of food insecurity in certain regions of Madagascar.
Madagascar’s national development plan (NDP) for 2015–2019 pursues to “value and protect Madagascar’s natural capital through strong growth and inclusive services for the equitable and sustainable development for all” by fostering inclusive economic growth and building human, economic and environmental capital for sustainable development. Under the NDP Madagascar has included the following strategies related to enhancement green economy: i) the sector programme for agriculture, livestock and fisheries (2016–2020) aims to ensure more sustainable use of resources, increase productivity and access to markets, improve national contributions to food security and nutrition, and reduce risk; ii) the national climate change strategy (2012–2025) aims to strengthen climate change adaptation activities and support risk reduction strategies using sustainable financial instruments; iii) the national strategy for disaster risk management (2016–2030) aims to strengthen national emergency preparedness and response systems for supporting implementation of the national development plan .
In addition, agriculture is a key pillar of the Malagasy economy, reflected in existence of an Agriculture, Livestock and Fisheries Sector Programme (PSAEP) 2015-2025.
Successes and remaining challenges
The main characteristics of the Malagasy economy include the availability of unique and diverse natural resources. Madagascar has a small but reasonably diversified private sector which has the potential to thrive, in part due to a relatively literate workforce. In particular, unparalleled biodiversity and cultural wealth could drive large tourism expansion. However, the natural resources are highly exposed to the impacts of climate change, and Madagascar has not sufficiently adapted to current and future climatic conditions. In addition, extreme weather events have also been important drivers of persistent poverty .
Madagascar’s past suggests that the country is capable of strong growth when its assets are deployed effectively and when there is political stability. For example, between 2003 and 2008, large mining investments, a vibrant export processing zone, and the introduction of important reforms in several areas, including investment climate, resulted to an average growth rate of 6.3 percent. Madagascar has a comparative advantage in sectors that use its unique biodiversity, rich natural resources and abundant (unskilled) labour intensively such as tourism, agribusiness, fisheries, extractive industries, trade services, and textile industries. However, periods of political instability often disrupt the growth.
Initiatives and Development Plans
Since 2013, Madagascar has had a National Scientific Research Strategy, which was developed to meet the needs of sustainable development. The green economy plays a major role in the fight against poverty . Today, Madagascar's main development challenge is to reduce poverty and improve the living conditions of populations . The national access rate to electricity increased from 15% in 2015 to 26% in 2021 and the share of clean energy production in the country's energy mix increased from 25% in 2015 to 45% in 2021.
In order to maintain green growth, Madagascar needs focus on climate change adaptation and mitigation and to invest especially in human capita and enhance agricultural productivity. In addition, Madagascar also needs to further expand the most potential sectors of the economy, which are focused on exports and investment related activities. To accelerate the pace of growth, Madagascar also needs to address the challenges related to connectivity, human capital and the business environment, while incentivizing the uptake of improved technologies to enable other sectors, such as agriculture, to realize their potential .
One of the main priorities for the EU in Madagascar is to accelerate inclusive economic growth and sustainable job creation, especially for women, by improving connectivity and access to energy, implementation of the Economic Partnership Agreement (EPA) and the development of value chains .
Goals and Ambitions
As stated in Madagascar’s national development plan (NDP) for 2015–2019, Madagascar pursues to “value and protect Madagascar’s natural capital through strong growth and inclusive services for the equitable and sustainable development for all” by fostering inclusive economic growth and building human, economic and environmental capital for sustainable development .
- It is a priority that Madagascar develops the capacity to adapt to climate change. This is particularly crucial in the south of the country where vulnerability to climate change is alarming.
- Madagascar should strengthen the application and monitoring of its environmental legislation, encourage green investments and implement sound environmental economic instruments.
- The COVID-19 pandemic has caused unprecedented negative social and economic impacts in Madagascar. As the government of Madagascar takes urgent action and lays the foundation for its economic recovery, creating a more sustainable, inclusive and climate-resilient economic opportunities is crucial.
- Recovery efforts should prioritize investments that stimulate employment and economic activity; have positive impacts on human, social and natural capital; protect biodiversity and ecosystem services
 The World Bank (2017). International Development Association And International Finance Corporation And Multilateral Investment Guarantee Agency Country Partnership Framework For The Republic Of Madagascar For The Period Fy17‐Fy21.