Madagascar's economy is showing signs of recovery, but growth remains uneven and insufficient to significantly enhance living standards. The economic growth rate was 4.2 percent in 2024, with expectations for a gradual increase averaging 4.7 percent from 2025 to 2027. This growth is anticipated to be driven by the textiles, mining, and services sectors, contingent on the continued implementation of structural reforms designed to strengthen market competition and improve the investment climate.
The Madagascar Economic Update: Bridging the Productivity Divide emphasizes the need to boost productivity for sustainable economic growth and job creation. It examines firm-level productivity challenges using recent survey data and suggests methods to enhance productivity among 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 two decades and ranks among the lowest globally. A worker in Madagascar is three times less productive than an average worker in Sub-Saharan Africa. GDP per worker has been decreasing at an average rate of 0.2 percent annually. The most productive firms can offer salaries up to seven times higher than those offered by less productive firms. Challenges such as limited access to finance, unreliable public services like electricity and water, political uncertainties, poor transport infrastructure, and low human capital hinder productivity.
“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 stimulate growth effectively requires improving firm productivity by allocating resources efficiently to productive enterprises while supporting new business entries. Addressing these challenges involves increasing access to finance, promoting entrepreneurship initiatives improving infrastructure development programs supporting skills training simplifying government-to-business interactions as outlined in the report which highlights implementing reliable affordable electricity adoption digital measures enhancing competition inclusion expanding economic opportunities mobile money vulnerable groups enhancing fiscal space greater domestic revenue mobilization.