ANTANANARIVO, February 25th, 2025-Madagascar's economy is recovering, but growth remains insufficient and uneven to significantly improve living standards. Economic growth remained at 4.2 percent in 2024. Growth is expected to gradually pick up in 2025, with projections averaging 4.7 percent over 2025-2027. This growth will be driven by the textiles, mining, and services sectors, assuming the sustained implementation of recent structural reforms aimed at strengthening market competition in key sectors and improving the investment climate.
This edition of the Madagascar Economic Update: Bridging the Productivity Divide highlights the urgent need to boost productivity for sustainable and inclusive economic growth and job creation. It explores firm-level productivity challenges based on recent survey insights and proposes ways to enhance the productivity of Malagasy firms.
"Boosting productivity drives economic growth, creates better-paying jobs, and reduces poverty. Madagascar has faced low productivity for a long time, impacting its development. To improve productivity, reliable energy, efficient infrastructure, and connectivity are much needed. The World Bank supports these strategic areas and remains committed to working with the government, private sector, and people of Madagascar to achieve the necessary changes," said Atou Seck, World Bank Country Manager for Madagascar.
Productivity in Madagascar has been declining over the past two decades and is now among the lowest in the world. A worker in Madagascar is three times less productive than the average worker in Sub-Saharan Africa, with GDP per worker declining at an average rate of 0.2 percent per year. The most productive 25 percent of firms can pay up to seven times more than those offered by firms in the bottom 25 percent. Limited access to finance, unreliable public services, such as electricity and water, and political uncertainties remain significant obstacles to firm-level productivity. Poor transport infrastructure and low human capital also constrain growth.
"To achieve high and sustained growth, authorities must accelerate critical structural reforms in key sectors such as energy, digital, and mining. These reforms are essential to unlocking productivity potential, fostering innovation, and creating high-quality jobs. Strengthening governance and enhancing macro-fiscal resilience will further support these efforts, supporting long-term development and improving the livelihoods of the Malagasy people," agreed Sagita Muco, Senior Private Sector Specialist and Fanjaniaina Prisca Mamitiana, Private Sector Development Specialist of the World Bank in Madagascar.
To boost growth, it is important to improve the productivity of firms, allocate resources more effectively to productive enterprises, and support the entry of new businesses. Addressing these challenges involves increasing access to finance, promoting entrepreneurship, improving infrastructure, supporting skills training programs, and simplifying government-to-business services. The report highlights the necessity of implementing reforms to provide reliable and affordable electricity, adopt digital measures to enhance competition and inclusion, expand economic opportunities and mobile money access for vulnerable groups, and enhance fiscal space through greater domestic revenue mobilization.
