Morocco Economic Outlook

Economic performance and outlook

Real GDP growth was estimated at 4.1% in 2017, a year in which the agricultural season was exceptionally good. In September, cereal production reached 96 million quintals, up from 33.5 million in 2016. Much of this growth was driven by increased value added from agriculture (which grew 16.1% in 2017). Nonagricultural value added grew more slowly (3.1%), but its growth was higher than in 2016 (2.2%), driven mainly by services and extractive activities. Real GDP growth is projected to reach 3.1% in 2018.

Macroeconomic evolution

In 2017, Morocco continued its policy of fiscal consolidation that started in 2011. The budget deficit reached an estimated 3.6% of GDP in 2017, down from 4.1% in 2016, and is projected to be 3% in 2018. Foreign trade is expected to improve from 2016 as a result of lower wheat imports due to higher production and restrictions on imports and the evolution of exports resulting from new jobs in the automotive, aeronautics, and electronics sectors. Growth in exports (in constant prices) is expected to increase from 5.1% in 2016 to 6.6% in 2017 and to 6% in 2018. Despite the 30% increase in energy prices in 2017, growth in imports reached 5.7%, down from 7.2% in 2016, due to a 22% decrease in cereal imports. The current account deficit was an estimated 4% of GDP in 2017, down from 4.4% in 2016. This improvement is due to increased foreign direct investment (up 32% from 2016) and remittances (up 2%). Public debt decreased from 64.7% of GDP in 2016 to 63% in 2017. Inflation remains low at an estimated 0.9% in 2017.

Tailwinds

Morocco has embarked on careful implementation of fiscal decentralization, a comprehensive reform of the civil service, strengthened oversight of state owned enterprise, and improved targeting of social spending to protect vulnerable segments of the population. The sectoral strategies launched in the late 2000s to transform the economy and strengthen its resilience are showing results. In addition to favorable weather conditions, the excellent performance of the agricultural sector in 2017 is linked to a 52% increase in the use of certified seeds (1.66 million quintals, up from 1.09 million in 2016) and the good performance of livestock, market gardening, fruit, and fisheries. The Green Morocco Plan adopted in 2008 made it possible to diversify the sources of growth and increase agricultural productivity, thereby strengthening the resilience of agricultural GDP. In 2017, a new investment charter replaced that of 1995, turning the National Pact for Industrial Emergence into an Industrial Acceleration Plan. The development of the automotive sector through the influx of foreign direct investment, joint ventures, and local industrial integration is starting to be reproduced in other sectors, including renewable energy.

Headwinds

Despite improved GDP growth in 2017, the unemployment rate increased slightly, from 9.1% in 2016 to 9.3%, with a rate of 14% in urban areas compared with 3.2% in rural areas. Addressing pressing social issues may affect the government budget deficit, which stood at an estimated 3.6% in 2017.

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