Like most economies in the world, Madagascar’s economy has suffered a big shock in 2020 because of the Covid-19 pandemic. While a 4.2% growth was expected that year, it has rather seen a contraction of 3.8%. Although, official statistical data shows that the number of Covid-19 infections and the related deaths are not as dramatic as in other countries, notably the European countries and the US, the economy, which largely depends on tourism (tourism accounts for 15.7% of the Malagasy economy according to the World Travel & Tourism Council; and according to IMF, it accounts for 5% of the GDP) has however been deeply affected. The country has not gone through a total lockdown, but the decline in the global demand, especially in Europe, the main destination of Malagasy exports, has slowed down most of the important activities, mainly the textile industry which is the principal source of formal employment. Consequently, local income and demands are shrinking. Fiscal and customs tax revenues have also been impacted by the slowdown of imports.
But according to the Ministry of Economy and Finance, through the 2021 Financial Bill, “The Malagasy state will continue to support national demand and supply by targeting job generating sectors such as construction, rural economy, handicraft and entrepreneurship,” The Ariary (MGA) is expected to depreciate by 3.7% compare to the USD, as stated in the bill. The currency rate as of January 26, 2021 is USD1 for Ar 3,775.40 and EUR 1 for Ar 4,572.71 via the Central Bank of Madagascar.