An initial forecast in a draft budget submitted to the government was for 2.8 percent. The ministry did not say why the forecast had been cut.

Growth for 2011 would be 0.7 percent and inflation for next to the statement released late on Friday.

Madagascar has been mired in political uncertainty for most of the past three years. At the start of 2009, then-opposition leader Andry Rajoelina spearheaded often violent street protests against increasingly unpopular President Marc Ravalomanana.

Rajoelina seized power in March 2009 with the help of dissident army officers. Many donors branded the move a coup and froze non-emergency aid.

The government said it expected no external assistance or funding for the budget.

Analysts say the island faces an uphill struggle to regain the confidence of foreign investors who had been eyeing its deposits of oil, gold, chrome and uranium.

The tourism industry has taken a beating from the political unrest and textile exports have also suffered after Washington ended preferential trade deals under its AGOA initiative.