Economic perspectives for 2010: growth with optimism

These economic perspectives presented by the transitional and the HAT for the year 2010 are still very far from the promised booming development previously meant to worth the government’s unconstitutional change. In order to capitalize its expected plus 2.6% growth rate, the HAT is putting its money on an encouraging tax policy. The project is, however, still very much uncertain, since Camille Vital’s government is affording to hold the eluding foreign financial support’s return to be a done deal by the end of this first semester. The economic policy is, therefore, purely and simply based on political speculations. The HAT led unilateral moves are, thus, not helping to budge things in the positive sense of improvement, so far merely symbolized by a public deficit limited to 3.2% of the GDP.  

Could foreign financial support be back, there will be room for the encouraging tax policy. Speculating the capitalization of such policy is, actually, not as foolish as it seems, since the private sector must be given a hand anyway in order to kick start some of the key sectors. The HAT foresees, on this account, the lowering of some taxes, as pioneered by taxes on agriculture production tools. The state chess’ blanks are not to be felt if foreign financial support’s public investments are back. Anyway, the year 2010’s forecasts as for the primary sector were a 2.6% positive growth. The sector’s dynamism will be kept running at a decent level by the continuation of the development of rice production enhanced by a correct water management, and by general restoration of large scale producing areas. The expected result is a 3.5% positive growth.   

The development of the agricultural branch, contributing to “15% to the overall added value in 2010 “, is a political as well as economic stake. The recovery will be mostly supported by the industrial sector, meant to enjoy a 8.5% positive growth rate, according to the HAT and its government’s expectations. There is nothing to expect either from tax free zones or from the general textile branch but respectively some 15 and 30% negative growth. Without much surprise, the authorities are betting on the mining industry and its 411.3% positive growth. QMM corp.’s led mining exploitation of ilmenite is, together with the exploitation of nickel and cobalt in Ambatovy by Sheritt international, and some projects in the energy field, the state economy’s leading engine.  

In the servicing sector, construction and public works (+3.0%) and the Telecommunication (+3.5%) will be the growth’s reactors. The Vital government does not yet fully rate the economic impact of the exploitation of fibber optic networks serving the international high speed connection, and still counts on job and added values creation. Tourism recovery promises to be difficult even though some encouraging measures are being planned. The visa fee exemption for less than one month long stays is retained. To In the end, the whole servicing sector would merely enjoy a 1.4% positive growth. 

The single ground for pessimism in the year 2010’s economic perspectives, drafted by the HAT, is the skyrocketing inflation, dimmed to overtake the psychological plus 10% limit, to be reaching plus 13.6%. If the improvement of the political environment is the main factor for foreign financial support’s return, it might also serve as an excuse for the exchange rate’s free fall, together with independent factors as oil prices’ fluctuation. It would have at least one positive impact: imports will decrease by a couple of percents.  

The state is, thereupon, expecting to reduce losses related to current transactions from minus 976.2 millions of DTS, or 16.2% of the GDP in 2009, to 742 millions DTS, or 12.2% of the GDP in 2010. “The global balance had to support some 76.6 millions of DTS in losses in 2009, whereas it enjoyed 66.1 millions of turnover DTS in 2008 “. In 2010, the increase of currency flows, from 43.3 millions of DTS to 132.3 millions DTS, would give room to the current balance of payments’ result to minus 8.7 millions DTS.