Housing Investment Landscapes: Madagascar

Madagascar is recovering from its most recent political crisis (from 2009 to 2013) and the economy has been strengthening since the return to constitutional order in 2014. As the World Bank notes, increased public investment, resumption of foreign aid, and access to external markets have boosted GDP, especially in the public works, construction, and manufacturing industries. The country’s economic growth rate has exceeded 4 percent since 2016.

Most of the Malagasy population has not benefited from the economic recovery. Almost 80 percent of the population lives on less than $1.90 a day; one child in two under five years suffers from stunting; and Madagascar has the fifth highest number of unschooled children in the world. Moreover, the rate of access to electricity is 13 percent, one of the lowest in the world.

An extreme vulnerability to natural disasters makes the country’s predominantly agriculture-based economy volatile: the current population is approximately 24.9 million people and 71 percent of households are involved in farming. A series of weather events in 2017, for example, resulted in a 20 percent fall in rice production, setting back may households for months. Madagascar must strengthen the resilience of the productive sectors, especially agriculture, to achieve sustainable economic growth that benefits its poorest citizens.

Inflation rose sharply in 2017, reaching 9 percent in December, the highest price increase in seven years. This trend is due to the commodity price hike linked to the decline in rice production. One recent economic trend that has helped the country immensely is the soaring price of vanilla bean, which it sells on international markets. Vanilla export earnings helped curb the external current account deficit, maintain the value of the local currency, and build up adequate foreign currency reserves.

Madagascar’s medium-term outlook is mostly positive, with a GDP growth rate projected to exceed 5%. However, the uncertainties surrounding the late 2018 presidential elections could provoke a wait-and-see attitude in the private sector in 2018.

Investment in affordable housing finance is minimal; most housing development projects are targeted at the country’s wealthy. El-hadj M. Bah et al. estimate the housing backlog at 2 million units as of 2015. The country has one of the fastest urbanisation rates at 4.60 and approximately 35 percent of the population lives in urban settings. The urban poverty rate is 52 percent.