The Central Bank of Madagascar has published its first quarter 2026 economic surveys for the banking sector and formal businesses, showing weaker conditions across both. In banking, credit activity continued to slow, with opinion balances on credit demand and credit granted at minus 35.2 percent and minus 52.4 percent, while outstanding bank claims on the economy rose only 0.7 percent. In the wider economy, the synthetic business activity indicator fell to minus 39.9 percent from plus 17.3 percent in the previous quarter, pointing to a marked contraction in formal-sector activity. Bank lending remained concentrated in short-term credit, which accounted for 61.5 percent of loans, mainly benefiting commerce and agriculture, while medium and long-term lending stayed more oriented toward commercial activity. Banks reported broadly stable lending conditions, higher deposit rates, lower lending rates, continued hiring and weaker profits. The main constraints were cyclones since February 2026 and persistent sociopolitical and economic uncertainty, each cited by 92.3 percent of surveyed banks. Among firms, sales, order books, investment and employment weakened, especially for large companies and the secondary sector, while higher unit costs and lower selling prices drove profits lower. Businesses identified economic uncertainty, power outages, sociopolitical uncertainty and transport network problems as the main obstacles. For the second quarter of 2026, banks expect credit activity to rebound, with a plus 69.0 percent opinion balance on expected lending, improved profits and broadly unchanged credit conditions, while credit allocation is expected to remain focused on commerce, transport and construction. Businesses, by contrast, expect the downturn to continue, with the activity indicator projected at minus 35.6 percent, alongside further weakness in sales, orders, investment and profits, and more restrictive bank credit conditions overall.

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