Morocco Economic Outlook

  • The Moroccan economy displayed a degree of resilience in a particularly difficult economic context, growing by 3.2% in 2012, driven by internal consumption and public investment. However this growth cut into foreign exchange reserves and deepened the fiscal deficit.
  • Funding the economy remains a major challenge if the country is to maintain its momentum, and continuing reform is essential to check the rise in public spending, particularly of the compensation fund (Caisse de compensation), that pays subsidies for oil and basic goods.
  • Morocco has a coherent strategy in place since the early 2000s to achieve its medium-term vision and has made a good start on structural change, with Morocco’s phosphate industry – the world’s biggest producer and exporter – playing a key role both from a financial point of view and as a source of growth for other sectors of the economy, though the textile industry is among those needing to reposition quickly in the face of international competition.

Thanks to its economic development model, which combines openness, liberalisation and structural reform, Morocco has shown resilience in a difficult national and international context. Nevertheless the slowdown in activity in Europe, which is the country’s chief economic partner, and below-average agricultural production resulted in a distinct slowdown in growth, which was 3.2% in 2012. That rate makes it impossible to reduce the high level of unemployment, especially among young graduates and women.

However, growth should pick up in 2013 to reach around 4.6%, driven by the consolidation of internal demand. Some industries have been given a boost by the implementation of the 2009-15 National Pact for Industrial Emergence (Pacte national d’émergence industrielle, {PNEI}) and they should make a vigorous contribution to growth.

The PNEI is the result of strategic choices made at the start of the 2000s to encourage the emergence of new centres of growth, competitiveness and jobs. Morocco has focused on encouraging niche industries for export and on international promotion of emerging services to businesses. As a result, relocation of services, the automotive sector and transport and logistics are all thriving.

The economic programme of Prime Minister Abdelilah Benkirane calls for the programme commitments of the previous governments to continue, in particular in respect of social policies and public investment, while bringing down the budget deficit to 3% by 2016. It should be noted that the early reform of the compensation fund, a socially sensitive issue, is a prerequisite for achieving this goal of cutting the deficit. The fund provides subsidies for basic necessities such as cereals and sugar as well as petroleum products and in 2012 absorbed almost 20% of state revenues. Its cost amounts to nearly 6% of gross domestic product (GDP). Steps were taken in June 2012 to limit the explosion in spending but the fund still cost almost MAD 53 billion (Moroccan Dirham) compared with the MAD 32 billion originally forecast. Foreign exchange reserves have been falling fast since 2008 while remittances from Moroccans overseas have been declining, so that financing the fund’s activity is the next challenge facing the country’s economy.

While funding of public infrastructure and the flagship projects of the PNEI can still be covered by calling on the external market and foreign investors, household savings need to be reinvigorated. To this end banks will need to make extra efforts to mobilise these savings to avoid rationing credit in job-creating sectors such as property and small- and medium-sized enterprises (SMEs) and industries (SMIs).

On the political front administrative reforms are being speeded up so that articles 156 and 167 of the new 2011 constitution relating to government administration can come into effect. But the Islamist government is the subject of criticism over progress on such major issues as the reform of the justice system or the fight against corruption. It is worth remembering that the Islamist Justice and Development Party (Parti de la justice et du développement, {PJD}) won the November 2011 elections by campaigning against corruption.


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