Political and economic problems push Madagascar down Euromoney Country Risk rankings

Jeremy Weltman
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The combination of a weakened economy and intractable political problems has led ECR experts to downgrade Madagascar, a country of some 15 million people but which receives no coverage by any of the leading credit ratings agencies: Fitch, Moody’s or S&P.

The borrower’s score has fallen by 1.2 to 34.3 since Q2 2012, pushing it down six places to 113 out of 186 countries in ECR’s global rankings, one place below Greece and below rising-Liberia (now 108th).

Scores have been lowered for eight of the country’s 15 risk indicators, including four of the political risk sub-factors: government stability, government non-payments/non-repatriation, institutional risk, and the regulatory and policy environment.

The diminishing faith in Madagascar among ECR’s small pool of experts highlights the country’s political deadlock ahead of presidential and parliamentary elections, which are supposed to take place next year.

The unelected president Andry Rajoelina and his predecessor Marc Ravalomanana – ousted by Rajoelina in a coup in 2009 and in exile in South Africa – have failed to resolve their differences, despite the best efforts of the Southern African Development Community.

The country had seen some improvements to the regulatory environment, with a streamlining of regulations, making it easier to start a new business and access credit, boosting the country’s World Bank Doing Business ranking by seven places, to 137 out of 183 countries, in 2012.

Yet, real GDP grew by a paltry 0.6% in 2011, according to the latest African Economic Outlook, produced jointly by the African Development Bank and Organization for Economic Cooperation and Development.

And the continuing political crisis, coupled with fiscal austerity, and the debt problems in the eurozone affecting both goods exports and tourism inflows, continue to undermine economic prospects.

This article was originally published by Euromoney Country Risk.