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Morocco Economic Outlook

Macroeconomic performance

The economy continues to show resilience. Although slowing, real GDP growth was positive at an estimated 3.1% in 2018, down from 4.1% in 2017, reflecting less rainfall. The fiscal deficit, an estimated 3.9% of GDP in 2018, up from 3.7% in 2017, is expected to gradually shrink under fiscal consolidation, tax reform, the rationalization of public expenditure, and more effective collection of tax revenues. The medium-term economic outlook projects a continuing decline in real GDP growth, to 2.9% in 2019, before a rebound to 4.0% in 2020. The projected slowdown in 2019 is attributable to a slight decline in primary sector value added.

Tailwinds and headwinds

The introduction in 2018 of a floating exchange rate regime controlled within a band of ±2.5%, versus the previous ±0.3%, was perceived as a positive sign by investors and an important step toward wide flexibility in the exchange rate regime. In the first eight months of 2018, the dirham rose 1.9% against the euro and slipped 0.9% against the US dollar. Debt remains sustainable and is expected to decline over the medium term. The current account deficit was an estimated 3.8% of GDP in 2018, up slightly from 2017, reflecting primarily a rise in imports of oil and capital goods, while alleviated by tourism receipts and remittances.

Morocco has achieved remarkable economic performance over the past decade. The stock of core infrastructure has grown thanks to an average capital investment rate of 34% during 2008–18, compared with 29.8% in 2007, enhancing the country’s attractiveness to foreign direct investment. In agriculture, the main source of income in rural areas, productivity gains are still low despite the Green Morocco Plan aimed at boosting agriculture and stoking industry. The acuteness of water stress affects production and increases the volatility of farm incomes, leading to rural exodus.

Economic diversification into the automotive, aeronautics and electronics industries has been a core objective of the Industrial Acceleration Plan. These diversification efforts are expected to extend the agribusiness and service sectors and stimulate technology transfer and job creation. Its success will depend on, among other factors, the ability to implement human capital development policies that match the needs of the various productive sectors. Agriculture, which contributes substantially to combating rural poverty, has to be smarter and refocus on low–carbon footprint activities that leverage technology and innovation— critically necessary due to water scarcity. The improvement in the business environment must be continued to create real opportunities for boosting the private sector, even though authorities are creating enclaves of excellence around the country through special economic zones. Its overtures to Sub-Saharan Africa also offer Moroccan companies new opportunities. More effective and efficient public spending can create the necessary fiscal space to fund social and territorial development policies, and make growth more inclusive.>