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Madagascar economic update : when political instability becomes economic downfall (English)

Financial and economic data are increasingly difficult to obtain due to the persistent political crisis and continuing instability within the public administration. Any effort to diagnose the state of the economy is therefore necessarily tentative, and the results should be interpreted with caution. However previous trends persisted during July-August: fiscal revenues continued to fall short of projections, public spending remained cautious, monetary policy remained prudent, and the slowdown in economic activities dragged on. Although the official exchange rate and international reserves have remained stable during the past couple of months, signs of pressure are emerging on parallel exchange rate markets, with major foreign currencies commanding a premium of 10-15 percent as it becomes increasingly difficult to purchase them though commercial banks. As long as political uncertainty remains, it will be difficult to predict future economic developments. The current climate of fiscal austerity is likely to persist, given the continuing shortfall in tax revenues and the quasi-absence of access to new sources of funds from the international community. The combination of political uncertainty and fiscal austerity have impacted negatively on the private sector and adversely affected the population as a whole, through several channels. Most recent projections anticipate that Gross Domestic Product (GDP) growth will be negative, not only in 2009 but also in 2010. Facing severe resource constraints, the government will be challenged to deliver social goods and services. Its capacity to respond to exogenous shocks such as cyclones will also be seriously undermined.

Details

  • Document Date

    2009/09/15

  • Document Type

    Working Paper

  • Report Number

    64331

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    Madagascar,

  • Region

    Africa,

  • Disclosure Date

    2011/08/30

  • Disclosure Status

    Disclosed

  • Doc Name

    Madagascar economic update : when political instability becomes economic downfall

  • Keywords

    Public Spending;political uncertainty;foreign currency;balance of payment;volume of transaction;parallel exchange rate;political context;fiscal austerity;Economic Policy;private-sector activity;excess liquidity;political crisis;international reserve;food import;food industry;fiscal revenue;construction sector;tax revenue;textile sectors;commercial bank;current expenditure;international community;severe resource constraints;sources of fund;exchange rate management;total tax revenue;area of regulation;annual inflation rate;income tax collection;budget execution rate;public domestic borrowing;official exchange rate;foreign exchange market;lack of demand;local commercial bank;global economic crisis;restrictive fiscal policy;private grain trader;consumption;public worker;public reporting;t-bill market;customs revenue;collect revenue;banking system;customs administration;Exchange Rates;illegal logging;domestic production;Capital Inflows;lean season;export revenue;external fund;quantitative restriction;private activity;intermediate indicator;jet fuel;gasoline consumption;domestic trade;Bank Credit;total credit;export sector;sector reports;investment expenditure;Wage Bill;external financing;local price;occupancy rate;tourist arrival;direct flight;domestic tax;monetary policy;Fiscal policies;restricted access;external aid;good performance;International Trade;efficiency loss;consumption decline;social instability;collected information;steep decline;political instability;social good;government intervention;financial crisis;minimum price;foreign investor;business environment;welfare gains;exogenous shock;governance environment;private investment;social unrest;rising unemployment;food price;heavy investment;public finance;export quota;

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Citation

Madagascar economic update : when political instability becomes economic downfall (English). Madagascar economic update Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/299931468054637919/Madagascar-economic-update-when-political-instability-becomes-economic-downfall