Madagascar economy to grow by 5.9% in 2006

Madagascar’s economy is expected to grow by 5.9 per cent in 2006, up from this year’s projected 5.3 per cent but lower than the 7 per cent previously forecast, according to a leaked draft budget.

Sources at the Finance Ministry would not comment on the budget, which was submitted to parliament on Thursday for approval. A leaked copy was published in Friday’s local press.

Local media said the budget report attributed the lower GDP forecast to power cuts that have crippled business this year as the state energy company grapples with huge debts and rising fuel costs.

Inflation should fall to 8 per cent from this year’s expected 15 per cent, according to the report. Inflation was 27 per cent in 2004, spurred by high oil prices, cyclone damage to food crops and a sharp fall in the currency.

The total budget for the fiscal year January to December 2006 is 5,285.8 billion ariary ($2.49 billion), up from last year’s 3,849.8 billion ariary. Much of the money will go on infrastructure, education and attempts to kick-start the island’s tiny private sector.

Changes in the budget deficit were not published.

The government kept value-added tax at 18 per cent.

Earlier this year, the government had predicted GDP growth in 2006 at 7 per cent.

The huge Indian Ocean Island is the world’s biggest vanilla exporter and Africa’s third biggest exporter of textiles to the United States. It is one of the world’s poorest countries, with three quarters of people living on less than a dollar a day.

Mining companies like Rio Tinto and Dynatec are expected to start making big capital investments in Madagascar to extract vast quantities of ilminite and nickel.

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