Madagascar is one of the world’s poorest countries, with a gross domestic product of $3.7 billion, or $250 per person, in 1999. The economy remains, as in colonial times, predominantly agricultural, with 77 % of the labor force engaged in agricultural activities. Many operations controlled by French interests were nationalized in 1975. During the 1980s the agricultural area was affected by frequent cyclones and depressed prices for the nation’s primary exports, and in the early 1990s strikes and political instability associated with a change in government limited economic growth. The government’s budget in 1997 included revenues of $346 million and expenditures of $689 million.

Madagascar is a developing nation with a mixed economy. Agriculture dominates the economy, and the principal commodities include rice and cassava, the staple food crops, and a range of cash and export crops, particularly coffee, cloves, and vanilla. The nation's agricultural output has been unable to keep pace with the growth of the population, and many staples must be imported. Madagascar's gross national product (GNP) is not growing as rapidly as the population, and its GNP per capita is among the lowest in the world.

Madagascar faces problems of chronic malnutrition, underfunded health and education facilities, a roughly 3% annual population growth rate, and severe loss of forest cover, accompanied by erosion. Agriculture, including fishing and forestry, is the mainstay of the economy, accounting for 30% of GDP and contributing more than 70% to export earnings. Industry features textile manufacturing and the processing of agricultural products. Growth in output in 1992-97 averaged less than the growth rate of the population. Growth has been held back by antigovernment strikes and demonstrations, a decline in world coffee prices, and the erratic commitment of the government to economic reform. The extent of government reforms, outside financial aid, and foreign investment will be key determinants of future growth. For 2001, growth should again be about 5%.