The Central Bank of Madagascar has published its economic bulletin for the second quarter of 2025, showing that domestic activity weakened further even as inflation continued to ease modestly. Its business activity indicator fell to minus 15.9 percent from minus 5.1 percent in the first quarter, with negative contributions from the primary, secondary and tertiary sectors. Annual inflation slowed to 8.2 percent at end-June from 8.4 percent in March, while core inflation declined to 7.3 percent. On the external side, the current account deficit widened to 5.0 percent of GDP in the first half of 2025 from 2.9 percent a year earlier, although the overall external payments balance remained slightly positive and official reserves rose to USD 3.067 billion, equivalent to 6.2 months of imports. The bulletin also highlights tighter monetary conditions and shifts in domestic financing. The Monetary Committee raised the policy rate to 12.00 percent on May 7 from 10.50 percent, while the deposit and marginal lending facility rates increased to 11.00 percent and 13.00 percent. Banking system liquidity remained in surplus but narrowed sharply, and the central bank reported net foreign exchange purchases of USD 55.0 million on the interbank market in the first half. The ariary appreciated by 5.4 percent against the US dollar and depreciated by 6.4 percent against the euro between end-December 2024 and end-June 2025. Fiscal operations showed a cash deficit of 0.9 percent of GDP at end-June, improved from 1.3 percent a year earlier, financed by net external resources, while bank credit to the economy remained strong with 7.0 percent growth over the first half. The bulletin notes that formal businesses surveyed expect a slight improvement in activity in the third quarter of 2025, with the business activity indicator projected at 3.1 percent.

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