Andry Rajoelina, centre, the transitional President of Madagascar, speaks about his political future as he addresses journalists during the inauguraiton of a hospital in Antananarivo on January 22, 2014. Picture: RIJASOLO

 Antananarivo - Madagascar leader Andry Rajoelina stood down on Friday, symbolically handing over power ahead of his elected successor's inauguration, a move designed to steer the Indian Ocean island out of crisis.

"I wish you all success, I give you my blessing," Rajoelina said, before handing a large golden key as a symbol of power to president-elect Hery Rajaonarimampianina.

A 55-year-old Canadian-educated former finance minister, Rajaonarimampianina will be officially sworn in on Saturday.

Regional mediator Joaquim Chissano and South Africa's deputy foreign minister Marius Fransman attended Friday's ceremony in the reception hall of the presidential residence, the Iavoloha Palace in the capital, Antananarivo.

Rajoelina, 39, who seized power in a 2009 coup, will likely remain a powerful figure. He has offered to become prime minister.

Both Rajoelina and the man he ousted, Marc Ravalomanana, were blocked from running in the polls to prevent violence, so their proxy candidates ran instead.

But there are cautious hopes that Rajoelina's exit from the presidency will end a political and economic crisis that has cost the island around $8 billion in lost growth.

Despite some mud-slinging, international observers gave the vote the green light and called on the parties to respect the electoral process.

Donor countries have lauded the democratic transition so far, but cautioned that normalising relations with Madagascar depends on the formation of a new government.

"It's at the end of this journey that we hope Madagascar could rejoin the rest of the international community and return to constitutional order," European Union representative Leonidas Tezapsidis said recently.

The return of democracy would also restore much-needed foreign aid.

"It opens the door to the normalisation of the country's relations with the World Bank and other partners who were subjected to operational restrictions in Madagascar since the start of the crisis," said World Bank country head Haleh Bridi.

The island's new leader is credited with reasonable management of the economy during the crisis, though detractors have accused him of covering up illegal trafficking by government allies.

He has vowed massive infrastructure development to kick-start growth and create jobs in a country, which is roughly the size of Ukraine and has a population of 22 million people.

Nine out of 10 people in Madagascar live on less than $2 a day. The economy grew 3.1 percent in 2012, lagging well behind most fast-growing African nations.

During last December's polls voters also selected 151 lawmakers in a single-round parliamentary election. The results have yet to be released. - AFP