Perspective 2010: a year of the uncertainty, and in no way of recovery

In this beginning of the year 2010, the economic situation is not disastrous, growth was even miraculously positive in 2009 with +0.6%. But boasting a blue sky situation with re-launched recovery is an excess of flattery for a reality filled with concerns. Indexes are all in the red zones but it is not yet a cause for panic to the country’s authorities. The adoption of a state budget on the year’s last day can never be a good sign.  

The administrative machine has had no time to assess this forcibly exceptional finance law. In short, the state will relate on a rational working budget, for the sake of austerity. Growth expectations are modest enough, even for a developing country. Plus 2.6% are utopia in the settings of political, social and economic crisis. The inflation would, as it is every year, be contained below 10%.  

They are more concerned with putting up quite a show since the finance law does not, cannot address the one year long political crisis originated problems. The suspension from the AGOA is too recent to have a sensitive effect. The country’s foreign currency return are likely to drop by 30%. The solutions proposed without big conviction are linked to tourism, and to evasive new technology and agriculture based services.  

Tourism is still a mourning sector, the political crisis is still taking a significant toll from the Destination Madagascar. The second solution, the NTIC based one, is hanging to the effectiveness of an international higher speed and lower cost link, as well to the next brood of vanguard workers’ training time. The third option, aiming at reconverting 100 000 workers, of which 45 000 direct textile industry workers toward agriculture, can be dropped right away for sharply lacking realism    

At any rate, the finance law has no place for any kind of measure aiming at settling the case of the crisis’ latest victims. The Finance Ministry certainly talked to private sector’s operators, but failed to agree on the required tax advantages meant to boost economic recovery. At least, the government did not commit to ask for higher taxes in order to replenish empty state chesses. The devaluation of the national currency will be a difficult decision since more problems will be created than solved.  

In 2010, the slowdown of direct foreign investments will continue. The sector of energy will be the odd one since explorations of coal and oil resources are reaching a decisive turning point. Unless the HAT remains committed to renegotiate contract terms with giants Sherritt and QMM, the mining sector might remain the country’s single one foreign currency source. Uncertainty over development projects’ financings from foreign international partners might jeopardize growth. Many projects are hit the road in June 2010, if the political situation in the country still fails to recover constitutional order.