The central bank estimates that the economy will usher in a cautious but promising recovery

The Central Bank of Madagascar yesterday published its economic situation report, which highlights in particular the encouraging signs of recovery for the second quarter of 2024. According to the economic situation survey conducted by the Bank, the Composite Index of Business Activity (IAE) reached 17.2% and the forecast for GDP growth in the current quarter is 2.4%. This improvement marks a turning point compared to last year, when the IAE posted a shocking figure of -10.6% in the same quarter. Growth dynamics therefore seem to be recovering, especially in the tertiary sector.

However, inflation remains a major concern for households. In June 2024, the inflation rate was 7.2%, slightly lower than in previous months, but still high. The price of the staple food rice increased by 5%, and energy prices increased by 8%. Despite the appreciation of the national currency, the Ariary, against foreign currencies, this phenomenon has not had a significant impact on consumer prices, and imports continue to increase. Corporate financial expectations indicate that the core inflation rate of 7.8% is likely to continue until the end of the year.

In the short term, the forecasts are more optimistic, with the IAE predicting a GDP growth of 19.8% in the third quarter of 2024. The revised financial law in 2024 foresees a GDP growth of 4.5% for the whole year. However, these results are highly dependent on price developments, exchange rates and seasonal fluctuations that can affect different sectors. The Central Bank of Madagascar predicts that inflation will reach 8% by the end of the year, a figure that could affect household purchasing power and must therefore be carefully monitored.

Finally, recent financial reforms, in particular the adoption of the LFR 2024, aim to optimize revenue mobilization and facilitate the execution of public spending. With growth forecasts of around 12.0% and an increase in foreign direct investments, especially in the textile sector and graphite exports, Madagascar finds itself at a crossroads in its economic development. The launch of the public investment program will play a key role in injecting liquidity into the economy, which is essential to support the current recovery and create new opportunities for the private sector.