Macroeconomics Affecting Madagascar's Economy

Madagascar is a country located on the east side of the African continent with approximately 22.92 million people inhibiting the island. It is a relatively new country, as they gained their independence from France on 26 June 1960. They have a republic government, with a prime minister ruling their six provinces. It is a fairly poor nation and is still behind the technology curve. Out of their entire population only 9 million people have cell phones and only 75% of the population has the ability to use the internet. The radio is still the most used communication medium in Madagascar due to the poverty and illiteracy among its people. Nearly 35% of the people in Madagascar are illiterate, and rather than declining, illiteracy has actually been …show more content…
The GDP for Madagascar’s purchasing power parity is $35.56 billion, with the GDP for official exchange rate only at $9.514 billion. The GDP real growth rate is currently 3.4% ranking Madagascar 89th in the world. GDP per capita is $1,500 ranking them 217th in world. GDP composition by sector of origin, agriculture: 26.5%, industry: 16.9%, services 56.6%. With such a low GDP per capita it is a vital indicator that their economy struggles to progress; however, currently this is the highest GDP Madagascar has had in many decades. The country struggles to properly feed, house, and clothe its citizens because they lack a strong infrastructure. Its agricultural vector consists mainly of coffee, vanilla, and sugarcane, while its industries focus on seafood, sugar, and textiles. Between the top individual income and corporate tax rates are 20%, having an overall tax burden equaling 9.3% of the GDP (World …show more content…
Many factors play into Madagascar’s rising inflation rate, high monetary expansion, foreign aid, and deficit financing. Their current account balance has also risen from 2014 to 2015, -$26 million to -$128 million, which correlates with the inflation rates. With the budget balance in a deficit and public debt are equivalent to 35% of the GDP (IEF). Military expenditures are only 0.69% of the GDP which is 119 out of all the countries in the world. This low expenditure is probably due to their small military forces; Army of 12,500, a Navy of 500, and 500 of Air Force. Also the last military conflict they were involved in was the Malagasy Uprising from 1947-1948 against France, otherwise they are not a stable enough country to be an ally, and however, they are a member of the United Nations