So far the dialogue between the main political parties has failed to produce an agreement on the way forward for a return to a democratic Government. For the time being, the economy continues to deteriorate but has shown some resilience due to two factors;
(i) Fiscal Policy: The strict fiscal policy pursued by the authorities has helped stabilize key financial indicators (interest rates, inflation, and the exchange rate)
(ii) The dual impact of the crisis on private sector and households: A segment of the economy has been seriously affected (such as tourism, textile and construction) resulting in job losses in urban areas. In contrast to these vulnerable sectors, a large fraction of the Madagascar economy has been isolated from the current recession (likewise they benefited less from growth in good times) because of the good rice harvest.
Three main challenges in the near future: (i) the payment of salaries to community teachers when classes will open in September, (ii) the reaction of textile companies to the uncertainty surrounding the US decision to maintain Madagascar as part AGOA, (iii) investment and planting decisions for the rice counter-season.
The question is will the Government be able to pass those tests in the absence of a political agreement?
To see the full report on the Madagascar economy, click here