A 0 but positive growth in 2009, an optimistic appreciation of the crisis?

Is the new Treasury secretary as optimistic as his predecessor? The Rajoelina administration’s efficiency was supposed to be displayed by its capacity to master the crisis in the country through an austerity policy, and to reckon upon other investors and financial backers. The result is not brilliant. The announcement of a 0.7% positive growth rate was short from being a good new, a miracle in face of the country’s economic slowdown. The propaganda for a real economic and social development at the time of the political takeover at the beginning of the political crisis proved to be simply… propaganda. 

The putsch and the bogged down political crisis in Madagascar have taken their tole on the country’s economic growth. Following a constant enhancement during the latest five years, the economy would have now receded by 6.8%, could the Finance ministry’s report be trusted. The most obvious reason to this was the suspension of helps and financings from and by financial backers. In 2009, the promised rain of million dollars of investments failed to fall  in spite of a Saudi Arabian prince’s encouraging stay. The big mining projects are currently the country’s crutches since they are, on their own, bringing crumbs to the desperately empty foreign currency reserves. 

In order to re-orientate the policy and join the way of growth again, minister Hery Rajaonarimampianina is anticipating the return of financial backers. The 2010 budget will reckon upon the resumption of budget helps and development programs. A foreign contribution of 1000 billions of ariary is being expected. The Treasury secretary is not going to push on the tax option which would slow the economy down even more.

In clear, the fiscal pressure will not be artificially increased, in the same way, the state is not going to enact tax rises. On the other hand, the Finance Ministry is going to keep going on with the tax basis enlargement policy. 

Economic crisis 

The receding economic growth is being displayed by the employment crisis in Madagascar. The BIT is rating up to 228 000 lost jobs as an aftermath of the outburst of the political crisis in the country. Could the country be excluded from the AGOA, this number would potentially overpass 300 000. Technical unemployment periodically hits enterprises every year. In 2009, the Ministry for Labour has registered 514 of such declarations, twice more than in 2008. The tertiary activity sector is the most hardly affected with more of 75% of job losses, while the primary one, in addition to the unrecorded figures, is nearly spared. Although, the downturn engulfing the food culture’s course is actively contributing to the economic slowdown. 

In this slowing down economy, the transportation field has been harshly affected. The drop of goods and people circulation rate is much more a cause than an impact of the downturn. In general, fuel consumption has plummeted. Tourism is not yet recovering from the crisis with a 70% drop of bookings. And to make matters worse as they already are, banks are failing to react in face of the cash overflow situation. As a matter of prudence, consumers are refraining from investing; and financial institutions do not lend that so easily in such a tense environment. The crisis of the year 2009 has, at least, taught a thing for good: do never believe a promised economic development put forth to support an unconstitutional government change.