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.
Details
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Author
Stocker,Marc, Razafimanantsoa Harivelo,Faniry Nantenaina, Lalaina,Minosoa, Tokle,Siv Elin, Ravelosoa,Julia Rachel, Aristide,Tinahy Emmanuelle, Rawlings,Laura B., Randrianatoandro,Zo Andrianjaka Tahiana, Mamitiana,Fanjaniaina Prisca, Quijada Torres,Cristian, Juquois,Maud, Pivodic,Fedja, El Ghandour,Ibrahim, Rajenarison,Lira Hariravaka, Peixoto,Tiago Carneiro, Rakotomalala,Olivia, Andriamihaja,Noro Aina, Gueye,Maimouna, Amboarasoa,Mampionona, Jarotschkin,Alexandra
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Document Date
2020/12/01
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Document Type
Working Paper
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Report Number
155100
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Volume No
1
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Total Volume(s)
1
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Country
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Region
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Disclosure Date
2020/12/15
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Disclosure Status
Disclosed
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Doc Name
Madagascar Economic Update : Setting a Course for Recovery
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Keywords
national institute of statistic; average for sub-saharan africa; social safety net program; flexible exchange rate regime; quality of service delivery; short period of time; sudden loss of income; small and medium size enterprise; current account balance; labor market program; foreign direct investment; million people; cash transfer program; Social Protection; current account deficit; financial sector specialist; public sector specialist; share of employment; budget execution rate; net foreign exchange; commodity price shock; social protection program; debt service payment; recruitment of teacher; international good practice; flow of fund; remote rural area; foreign exchange intervention; investments in infrastructure; consumer price index; global value chain; household food security; agriculture industry; suspension of payment; capital expenditure budget; primary current expenditure; external affairs; international oil price; operations and maintenance; alleviate Extreme Poverty; Foreign Exchange Reserve; consumer price inflation; flow of good; constraints to growth; improving food security; credit guarantee scheme; decline in revenue; balance of payment; provision of care; safety net measure; annual budget execution; distribution of food; misallocation of resources; private sector support; access to capital; treatment of patient; source of funding; human capital investment; social protection system; human capital development; Financial Management System; vulnerable population; economic recovery; vulnerable household; Job Creation; global trade; external financing; policy priority; budget deficit; Health Service; emergency measure; export revenue; baseline scenario; urban population; social insurance; business environment; supply chain; digital transformation; active cases; goods trade; agricultural productivity; banking sector; primary balance; domestic activity; debt amortization; financing need; Financial Stability; tourism sector; Vocational Training; government support; in poverty; Public Spending; Cash flow; loan repayment; reserve requirement; wage subsidy; viable business; social assistance; Wage Subsidies; creating opportunity; financial system; tax relief; mitigation measure; constitutional crisis; public debt; global demand; budget balance; infrastructure quality; trade balance; public expenditure; government response; air passenger; real gdp; present value
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Citation
Stocker,Marc Razafimanantsoa Harivelo,Faniry Nantenaina Lalaina,Minosoa Tokle,Siv Elin Ravelosoa,Julia Rachel Aristide,Tinahy Emmanuelle Rawlings,Laura B. Randrianatoandro,Zo Andrianjaka Tahiana Mamitiana,Fanjaniaina Prisca Quijada Torres,Cristian Juquois,Maud Pivodic,Fedja El Ghandour,Ibrahim Rajenarison,Lira Hariravaka Peixoto,Tiago Carneiro Rakotomalala,Olivia Andriamihaja,Noro Aina Gueye,Maimouna Amboarasoa,Mampionona Jarotschkin,Alexandra
Madagascar Economic Update : Setting a Course for Recovery (English). Madagascar Economic Update Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/726431608065032400/Madagascar-Economic-Update-Setting-a-Course-for-Recovery