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page of 1 19
Country Reports - Morocco
26 Nov 2014 IHS Economics and Country Risk
Our take
Key pointsThe Islamist Justice and Development Party (Parti de
la Justice et du Dveloppement: PJD) faces resistance within the
ruling coalition.More balanced growth is expected, but
agriculture's technical slowdown will weigh heavily on the headline
rate.Headwinds will persist, but should gradually ease.Morocco will
continue to make headway towards reducing the fiscal deficit.
AnalysisSix-Factor Country Risk - Morocco
Risk Score Description
Political 2.75 MEDIUM
Economic 2.75 MEDIUM
Legal 2.50 MEDIUM
Tax 2.50 MEDIUM
Operational 2.50 MEDIUM
Security 2.75 MEDIUM
Overall 2.65 MEDIUM
12-Month Rating Trend Stable Trend
Note: 1 = minimum risk, 5 = maximum risk. Ratings form part of
enhanced Country Analysis & Forecast suite of services.
Sovereign Risk Ratings - Morocco
Medium-Term 40(BBB-) Supportive Credit Fundamentals
Sovereign Risk Outlook Stable
Note: 0 = minimum risk, 100 = maximum risk. Ratings form part of
enhanced Economic and Sovereign Risk services.
The Islamist Justice and Development Party (Parti de la Justice
et du Dveloppement: PJD) faces resistance within the ruling
coalition. PrimeMinister Abdelilah Benkirane's scope of action is
constrained by the realities of the coalition government in
Morocco. The cabinet includes powerful pro-palacefigures resistant
to meaningful socio-political change. The reshuffle in October 2013
in which the Istiqlal Party (Parti de l'Istiqlal: PI) replaced the
National Rallyof Independents (Rassemblement National des
Indpendants: RNI) party has done little to change this situation.
Accordingly, although the PJD remains largelypopular, Benkirane
will struggle to push meaningful socio-political reforms through a
resistant bureaucracy, leaving the government increasingly exposed
topublic and trade union discontent over rising taxes and
diminishing subsidies.
More balanced growth expected, but agriculture's technical
slowdown will weigh heavily on the headline rate. After GDP growth
of 4.4% in 2013,largely driven by expansion of Morocco's
agriculture sector, growth will decline to less than 3% this year,
despite better growth from several non-agriculturesectors. Fiscal
consolidation efforts will continue to impact on government
consumption, but firm private consumption growth supported by
non-agriculturegrowth and improving external balances will provide
support to the headline rate. Unemployment above 9% will continue
to affect consumer sentiment;however, with services sectors
expanding, and construction sector activity gradually recovering,
IHS expects the jobless rate to edge lower in 2014.
Headwinds will persist, but should gradually ease. Household
sentiment remains poor in Morocco, but IHS expects improvements
this year, supported bymodest recoveries in the Eurozone. We expect
the Eurozone economies to record annual growth in 2014 after two
successive years of decrease. Although therecoveries will remain
sluggish, the trend will support Morocco's growing export-oriented
industries and result in greater remittance flows, having a
positiveimpact on the kingdom's household sentiment and private
consumption, which accounts for nearly 60% of GDP.
-
2014IHS. page of 2 19
Morocco will continue to make headway towards reducing the
fiscal deficit. Reining in the fiscal deficit remains a
considerable near-term challenge forMoroccan policymakers after the
spending hike amid the 2011 Arab Spring. Last year, thanks to a
larger tax take, restrained public investment spending, andsteps to
cut back the subsidy bill, fiscal performance improved on both the
spending and revenue sides. Further deficit reduction, albeit more
moderate, is likelythis year after authorities announced an end of
gasoline and fuel oil subsidies and plans to start cutting diesel
subsidies.
Forecast summaryGrowth prospects are brighter in 2015, as the
nonagriculture sectors continue to recover. Economic growth will
slow to less than 3% in 2014, down from4.4% in 2013. Lower rainfall
levels and a technical drag following a bumper harvest in 2013 will
cause the agriculture sector to weigh heavily on headlinegrowth,
given its sizable role in total output. At the same time,
nonagriculture-sector growth will firm and support an improving
employment picture, particularlyin 2015. The recovery in the
nonagriculture sectors is progressing, but more slowly than
previously expected. Preliminary first-quarter figures
weredowngraded, and second-quarter growth was just 2.3% year on
year, although nonagriculture growth accelerated, thanks to better
manufacturing and mining.Although the road to faster growth may
still be long, relatively improved global macroeconomic conditions
and recent structural reforms should begin to benefitMoroccos
economic performance in the next 12 months. Consumer price
inflation remains very low, which supports consumers purchasing
power.Remittances from Europe have slowly started to recover, while
tourism revenues are also growing, albeit very modestly. Yet,
domestic unemployment remainshigh, which is likely having an
overriding adverse affect on household consumption habits by
limiting disposable income and dampening sentiment.
The job market remains fragile, but should improve in 2015. The
unemployment rate ticked up during the third quarter to 9.6%, with
joblessness remaininghigh among urban youth. Better growth in 2015
will help improve business sentiment and hiring, resulting in a
gradual downward trend in the unemploymentrate. However, as
Eurozone growth remains weak, it will restrain Morocco from
achieving even higher growth and slashing unemployment. Morocco's
highgrowth during the 2000swhich successfully brought unemployment
to less than 10%was supported in large part by its expanding
externally orientedsectors, such as tourism, and greater business
interest from the Eurozone.
Following fuel subsidy reform, fiscal accounts will continue to
mend. Morocco's fiscal deficit narrowed to 5.5% of GDP in 2013,
down from a gap of morethan 7% of GDP in 2012. Reining in the
deficit remains a considerable near-term challenge for Moroccan
policymakers after spending was hiked amid the 2011Arab Spring.
Further deficit reduction, albeit more modest, is likely in 2014
after authorities implemented fuel subsidy reform early in the
year. However, asizable part of the subsidy bill is accounted for
by food and butane gas (cooking gas) subsidies, neither of which is
likely to be touched by reform, as they aremore politically
sensitive, having an impact on a greater number of Moroccans. The
authorities are aiming to reduce the fiscal deficit to 4.9% in 2014
and 4.3%in 2015.
Changes since last forecastNovember forecast versus October
forecast
Current
account
balance
UP A softer global oil price outlook (see assumptions section),
combined with ongoing improvements in Moroccos structural trade
balance, suggests the kingdoms current-account deficit will
decline more than previously expected in 2015.
CPI
inflation
DOWN Incorporating the new lower IHS Energy price forecast,
Moroccos projected inflation trend has been lowered through the
near term.
Assuming average crop yields, lower global oil prices lead to
less upward price pressure on domestic prices, as producers
face
lower costs. Our previous forecast projected average annual
inflation at 2.1% in 2015; however, this figure has been reduced
to
1.7%.
Selected data and charts: Data (forecasts)Political summary
Legislative elections (Lower
chamber)
Next contest: 2016 November; Last contest: 25 November 2011
(House of Representatives); 28 September 2012
(one-third of House of Councillors).
King of Morocco: Mohammed Vi (since 23 July 1999)
Crown Prince of Morocco: Moulay Hassan (since 8 May 2003)
Prime Minister: Abdelilah Benkirane (since 3 January 2012)
Source: IHS and CIRCA People in Power
Key Macro-Economic Indicators
2010 2011 2012 2013 2014 2015 2016 2017 2018
Real GDP (% change) 3.6 5.0 2.7 4.4 2.5 4.6 4.8 5.2 4.8
-
2014IHS. page of 3 19
Nominal GDP (US$ bil.) 90.8 99.2 95.9 103.8 106.7 104.9 114.5
129.3 141.0
Nominal GDP Per Capita (US$) 2,869 3,095 2,949 3,146 3,187 3,090
3,331 3,717 4,008
Consumer Price Index (% change) 1.0 0.9 1.3 1.9 0.4 1.7 2.1 2.5
2.7
Exchange Rate (LCU/US$, end of period) 8.36 8.58 8.43 8.15 8.95
9.13 8.72 8.57 8.45
Historical data from selected national and international data
sources. All forecasts provided by IHS Global Insight. Table
updated on the 15th ofSource:each month from monthly forecast
update bank (GIIF). Written analysis may include references to data
made available after the release of the GIIF bank.
Country risk - overall statement
OverallEntrenched parochial interests will continue to hinder
Morocco's Islamist-led government's efforts to introduce rapid
legal and administrative reforms, and tohold true to its commitment
to crack down on endemic corruption. Instead, improvements to the
generally favourable investment environment are likely toprogress
slowly but steadily over the next year. These will be supported by
international agreements, including the EU-Morocco Association
Agreement andMorocco's FTA with the United States. Presently, weak
external demand out of Europe is weighing heavily on Morocco's
economy through lower touristreceipts and remittances inflows, in
addition to dampening goods exports. In addition, elevated oil
prices, albeit cooling compared to record highs in 201112,are also
straining the kingdom's accounts (external and fiscal) as domestic
energy demands rise and subsidies remain overly generous and
inefficient. Ingeneral, however, Morocco's economic prospects are
favourable compared to regional competitors thanks to prudent
economic policies, good relations withtrading partners, and an open
economy. Politically, the risk environment is expected to remain
stable under the leadership of King Mohammed VI, who
remainsrelatively popular and has forged ahead with gradual
socio-economic improvements as well as constitutional reforms
designed to mollify pro-democracyprotestors. Despite effective and
proactive security forces, there remains a moderate threat of
attack by militant Islamists, particularly against
governmentbuildings and tourist sites in Morocco's commercial
capital of Casablanca. Youth unemployment remains a significant
problem, creating fertile ground for therecruitment of young
Moroccans by militant Islamist movements fighting in Syria and the
Sahel. The protracted territorial dispute between Morocco and
theAlgerian-backed Polisario Front over control of the
phosphate-rich territory of Western Sahara is highly unlikely to be
resolved anytime soon. The Polisariorejects Moroccan offers of
autonomy, reiterating calls for a referendum on the status of the
territory. This contributes to an increased risk of civil unrest in
theterritory should offshore oil-drilling commence as planned in
2014.
Economic: Country risk statementMorocco is a conservatively
managed economy, where prudent macroeconomic policies and
structural reforms over the past decade have promoted healthygrowth
and fostered one of the most open economies in the region. Despite
a firm commitment to economic reforms, much remains to be done to
improve thebusiness climate and expand private-sector
participation. Diversifying the economy away from the volatile
agricultural sector should continue, mainly throughpromotion of
services and export-oriented industrial activities, while more
institutional and financial reforms are also needed. Morocco's
Economic Risk Ratingwas last downgraded during third-quarter 2012
from 2.50 to 2.75, based on weaker near-term growth prospects that
played out in slower non-agriculture sectorgrowth in 2013.
Nevertheless, thanks to a bumper agricultural harvest, growth
picked up to 4.4% last year. Growth is expected to moderate as
agriculturesector growth normalizes, while non-agriculture sectors
recover in line with gradual improvements in external demand as
Eurozone growth tilts to a positivetrend in 2014. Stiff headwinds
will continue to buffet the economy, not least from broadly
pessimistic domestic households, which dampens privateconsumption
growth. Labor markets remain weak as key employment sectors, such
as construction, slumped in 2013, resulting in a rise in the
annualunemployment rate to 9.2%during the fourth quarter the rate
reached 9.5%. The real concern remains urban youth unemployment,
which continued to rise in2013; for the 2534 age group the
unemployment rate reached 19.8%. Mainly the result of lost
construction sector jobs, the total number of unemployedMoroccans
in 2013 increased more than 4% to 1.08 million, or an additional
43,000 jobless. Nearly all (81%) of the unemployed reside in urban
areas, whichexplains the comparatively higher urban unemployment
rate of 14.0%. Ongoing fiscal consolidation efforts, including the
impact of recent tax and subsidyreform, have the potential to
adversely affect economic growth as the state pulls back after
boosting spending during the Arab Spring. The economysprospects
remain highly vulnerable to the performance of the large
agriculture sectoralso the countrys largest employment sectorwhich
periodically suffersfrom drought, resulting in depressed economic
growth.
Short-term outlook
Key points
Growth prospects are brighter in 2015, as the nonagriculture
sectors continue to recover.The job market remains fragile, but
should improve in 2015.Following fuel subsidy reform, fiscal
accounts will continue to mend.
Analysis
-
2014IHS. page of 4 19
Analysis
Growth prospects are brighter in 2015, as the nonagriculture
sectors continue to recover. Economic growth will slow to less than
3% in 2014, down from4.4% in 2013. Lower rainfall levels and a
technical drag following a bumper harvest in 2013 will cause the
agriculture sector to weigh heavily on headlinegrowth, given its
sizable role in total output. At the same time,
nonagriculture-sector growth will firm and support an improving
employment picture, particularlyin 2015. The recovery in the
nonagriculture sectors is progressing, but more slowly than
previously expected. Preliminary first-quarter figures
weredowngraded, and second-quarter growth was just 2.3% year on
year, although nonagriculture growth accelerated, thanks to better
manufacturing and mining.Although the road to faster growth may
still be long, relatively improved global macroeconomic conditions
and recent structural reforms should begin to benefitMoroccos
economic performance in the next 12 months. Consumer price
inflation remains very low, which supports consumers purchasing
power.Remittances from Europe have slowly started to recover, while
tourism revenues are also growing, albeit very modestly. Yet,
domestic unemployment remainshigh, which is likely having an
overriding adverse affect on household consumption habits by
limiting disposable income and dampening sentiment.
The job market remains fragile, but should improve in 2015. The
unemployment rate ticked up during the third quarter to 9.6%, with
joblessness remaininghigh among urban youth. Better growth in 2015
will help improve business sentiment and hiring, resulting in a
gradual downward trend in the unemploymentrate. However, as
Eurozone growth remains weak, it will restrain Morocco from
achieving even higher growth and slashing unemployment. Morocco's
highgrowth during the 2000swhich successfully brought unemployment
to less than 10%was supported in large part by its expanding
externally orientedsectors, such as tourism, and greater business
interest from the Eurozone.
Following fuel subsidy reform, fiscal accounts will continue to
mend. Morocco's fiscal deficit narrowed to 5.5% of GDP in 2013,
down from a gap of morethan 7% of GDP in 2012. Reining in the
deficit remains a considerable near-term challenge for Moroccan
policymakers after spending was hiked amid the 2011Arab Spring.
Further deficit reduction, albeit more modest, is likely in 2014
after authorities implemented fuel subsidy reform early in the
year. However, asizable part of the subsidy bill is accounted for
by food and butane gas (cooking gas) subsidies, neither of which is
likely to be touched by reform, as they aremore politically
sensitive, having an impact on a greater number of Moroccans. The
authorities are aiming to reduce the fiscal deficit to 4.9% in 2014
and 4.3%in 2015.
Assumptions
World real GDP growth is projected to rise only modestly, from
2.6% in 2013 to 2.7% in 2014, before picking up to 3.2% in 2015 and
3.5% in 2016. TheEurozone is projected to eke out growth of 0.8% in
2014, after two years in recession, before modestly firming to 1.4%
in 2015.The IHS Energy forecast of crude oil prices has been
revised downward through 2018. The average price of Dated Brent is
now projected to drop from$101 in 2014 to $88 per barrel in 2015
and $86 in 2016, with a tightening supply/demand balance allowing
for a recovery to $95 in 2017 and $102 in2018.There is no major
political setback in the near term. Turmoil in other MENA-region
countries does not significantly spill over into Morocco, where
thepopularity of King Mohammed VI and the political and
socioeconomic reforms he has implemented in his more-than-a-decade
in power help limit thesize and scope of protests around the
country.No major terrorist attack occurs in Morocco in the short
term; a large-scale terrorist attack would have an outsized adverse
effect on the tourism sector.In addition, Western Sahara remains
under Moroccan sovereignty, and there is no major outbreak of
violence.
Changes since last forecastNovember forecast versus October
forecast
Current
account
balance
UP A softer global oil price outlook (see assumptions section),
combined with ongoing improvements in Moroccos structural trade
balance, suggests the kingdoms current-account deficit will
decline more than previously expected in 2015.
CPI
inflation
DOWN Incorporating the new lower IHS Energy price forecast,
Moroccos projected inflation trend has been lowered through the
near term.
Assuming average crop yields, lower global oil prices lead to
less upward price pressure on domestic prices, as producers
face
lower costs. Our previous forecast projected average annual
inflation at 2.1% in 2015; however, this figure has been reduced
to
1.7%.
Alternative scenarios
A spike in global oil prices would raise Morocco's energy
imports and significantly deteriorate the balance of payments. The
sovereigns credit ratingwould come under pressure if elevated
prices were prolongedroughly one-quarter of Moroccos import bill is
energy imports.Stronger-than-expected growth in the Eurozone in
2014contrary to our current forecast of modest 0.8% growthwould
support an improving externalposition and boost growth above our
baseline forecast given linkages to the continent.A deep recession
in the Eurozone in the short termsuch a scenario would lead not
only to significant decreases in Moroccan merchandise exports
toEurope, but also to a sharp drop in European tourists to Morocco
and a steep reduction in FDI.Religious extremism, labor unrest, or
a war in Western Sahara would undermine macroeconomic reforms,
leading to capital flight, devaluation pressureon the dirham, as
well as higher inflation.
-
2014IHS. page of 5 19
A sharp appreciation of the euro against the US dollar could
deter Moroccan companies from targeting the US market, despite the
free-trade agreementbetween the United States and Morocco.
Morocco's currency, the dirham, is fixed to a euro-US dollar
basket; however, the euro bears a much heavierweight than the
dollar.
Data
Key Macro-Economic Indicators
2010 2011 2012 2013 2014 2015 2016 2017 2018
Real GDP (% change) 3.6 5.0 2.7 4.4 2.5 4.6 4.8 5.2 4.8
Nominal GDP (US$ bil.) 90.8 99.2 95.9 103.8 106.7 104.9 114.5
129.3 141.0
Nominal GDP Per Capita (US$) 2,869 3,095 2,949 3,146 3,187 3,090
3,331 3,717 4,008
Consumer Price Index (% change) 1.0 0.9 1.3 1.9 0.4 1.7 2.1 2.5
2.7
Policy Interest Rate (%) 3.25 3.25 3.00 3.00 2.75 2.75 3.25 3.25
3.25
Fiscal Balance (% of GDP) -4.7 -6.7 -7.4 -5.5 -4.9 -4.6 -4.0
-3.5 -3.2
Population (mil.) 31.64 32.06 32.52 33.01 33.49 33.96 34.39
34.79 35.18
Unemployment Rate (%) 9.1 8.8 9.0 9.2 9.5 9.1 8.8 8.6 8.4
Current Account Balance (% of GDP) -4.5 -8.0 -10.0 -7.5 -6.2
-5.2 -4.2 -4.8 -4.7
BOP Exports of Goods US$bn 17.8 21.6 21.4 22.0 23.7 22.7 24.0
25.6 27.2
BOP Imports of Goods US$bn 32.7 40.9 41.4 42.3 42.9 40.0 42.0
45.6 48.5
Exchange Rate (LCU/US$, end of period) 8.36 8.58 8.43 8.15 8.95
9.13 8.72 8.57 8.45
Historical data from selected national and international data
sources. All forecasts provided by IHS Global Insight. Table
updated on the 15th ofSource:each month from monthly forecast
update bank (GIIF). Written analysis may include references to data
made available after the release of the GIIF bank.
Medium- and long-term outlook
Key points
Headline growth will rely on expanding services sectors and the
development of a knowledge-based economy.Reducing the domestic
economy's reliance on the volatile agriculture sector will limit
downside risk.Structural reforms will boost growth rates and
promote more inclusive development.Long-term growth will require
peace, as well as the continuation of broad-based structural
reforms.
-
2014IHS. page of 6 19
Analysis
Headline growth will rely on expanding services sectors and the
development of a knowledge-based economy. Moroccos real GDP is
expected toexpand on average by 4.7% per year over the medium term
(201519) and 2.9% over the long term (202044). Underpinning
headline growth in Morocco willbe strengthening services sector
growth as well as expanding exports. After slower growth in recent
years, we expect the tourism industry to bounce back andmake
important contributions to economic growth over the medium and long
termespecially as Eurozone growth tilts back to a stable upward
path.Meanwhile, exports are expected to expand robustly, supported
by the free-trade agreement (FTA) with the United States. The
US-Morocco FTA should leadto stronger foreign direct investment
(FDI) in the country over the long term, which will further benefit
growth and economic diversification in the kingdom.Moreover, growth
in labor intensive manufacturing sectors, including electronics,
automotives, and aviation, is expected as foreign firms look to
capitalize onMorocco's large supply of relatively inexpensive labor
as well as its close proximity to Europe.
Reducing the domestic economy's reliance on the volatile
agriculture sector will limit downside risk. By contrast to the
nonagriculture sectors, theeffect of agriculture on real GDP is
more difficult to assess, as expansion in this sector currently
depends a great deal on rainfall levels from year to year. Withpoor
management of available water resources, the government continues
to struggle to compensate for lower growth during drought years
when crop yieldsare weak. The authorities hope to lessen the
dependence of the economy on agriculture in the medium term through
promotion of other sectors. This trend isalready underway, as the
services sector surpassed agriculture as the kingdoms largest
employment sector in 2012. It is agriculture, however, that
willultimately remain the economic linchpin sector over the medium
term, accounting for 1520% of total output in a given year.
Moreover, more than 4.5 millionMoroccans, of the roughly 12 million
strong national workforce, make a living in the sector, while it
accounts for approximately 30% of total exports. Becausethe
agriculture sector is vulnerable to drought, its contribution to
GDP can fluctuate dramatically, making its performance the looming
downside risk to theforecast.
Structural reforms will boost growth rates and promote more
inclusive development. Macroeconomic reforms, greater economic
integration with theEuropean Union, in addition to political
stability are all necessary to support healthy growth through the
forecast horizon, which, , will help reduceinter aliaMoroccos
dependency on agriculture, bring down stubborn unemployment, and
move the economy up the value chain. We expect the government
willcontinue to implement trade liberalization and will accelerate
the implementation of structural reforms, including privatizations,
in a bid to attract foreigninvestment into the country to help
diversify the economy. Sound macroeconomic policies and
restructuring could make Morocco more attractive to
privateinvestors and would help improve overall productivity.
Morocco is already one of the most attractive investment markets in
Africa and it will aim to maintain thisdistinction in the long
term. Higher investment and economic productivity will shift growth
into a higher gear, but progress in reducing unemployment
andpoverty will nevertheless be slow moving, requiring labor market
reforms and sufficient time to take effect.
Long-term growth will require peace, as well as the continuation
of broad-based structural reforms. The Western Sahara issue is a
contributing factorto Morocco's strained relations with its
neighbor, Algeria. Morocco accuses Algeria of sheltering and
backing the Polisario, a rebel movement fighting forindependence of
Western Sahara, a vast desert region in southern Morocco. The risk
of military conflict between Morocco and the Polisario is small,
but willrapidly increase if all diplomatic venues for a peaceful
resolution of the Saharan conflict become exhausted. Such an armed
confrontation would have anegative effect on long-term
macroeconomic stability in Morocco by substantially reducing the
flow of foreign investments in the country and leading to
massivecapital flight. On the other hand, the continued
implementation of broad-based economic reforms will lead to
sustained expansion in the economy. In the longterm, these reforms
will help cushion the Moroccan economy from the volatility of the
agriculture sector. Meanwhile, the industrial sector will benefit
from closerties between Morocco and Europe (Morocco has an
advanced-status relationship with the European Union) as well as
strong relations with the United States.We expect the proportion of
services in GDP to rise steadily overtime, as Morocco remains an
important tourist destination over the forecast horizon. Thecountry
will also see a strong expansion in financial services while the
city of Casablanca attempts to position itself as a regional
financial hub.
Growth
GDP
Key points
GDP growth will accelerate as drag from agriculture diminishes
in the near term.Growth is becoming more balanced as the
nonagriculture sectors recover.Modestly better growth in the
Eurozone will begin to benefit the kingdom.
Analysis
GDP growth will accelerate as drag from agriculture diminishes
in the near term. After driving growth higher last year, the
agricultural sectorMoroccoslargest in terms of outputwill become a
considerable drag on growth in 2014. The sector expanded nearly 20%
in real terms in 2013, bouncing back from a2012 drought. Overall
GDP growth accelerated to 4.4% thanks to agricultures strong
rebound, more than offsetting weakness in nonagricultural sectors
suchas mining and construction. Mining (dominated by the phosphate
industry) and construction posted contractions through the first
nine months of the year;however, construction began to recover
during the fourth quarter (only to slow again in the first quarter
of this year). Comparatively stronger growth in thewholesale and
retail trade and services sectors has helped to offset lower annual
growth on the industrial side of the economy.
Growth is becoming more balanced as the nonagriculture sectors
recover and benefit from gradually firming external demand, less
political uncertainty,and rising business sentiment. While Moroccos
headline growth will fail to impress in 2014, IHS expects a gradual
recovery of nonagriculture sectors to feedinto firming private
consumption. As Eurozone growth begins to recover, Moroccos key
nonagriculture sectorsincluding manufacturing, tourism, and
-
2014IHS. page of 7 19
constructionwill benefit from rising investor sentiment and
firming external demand. Our current baseline projects growth
slowing to 2.5% in 2014. Moroccanconsumers remain downbeat, the
latest consumer survey showed that sentiment remains lowlikely
influenced heavily by elevated unemployment. So long asMoroccan
households keep a tight hold on their spending, the growth of large
sectorssuch as wholesale and retail trade and serviceswill remain
paltry byhistorical standards.
Modestly better growth in the Eurozone will begin to benefit the
kingdom. Manufacturing and construction sectors are likely to
gradually recover fromslumps in parallel with the Eurozone's
gradual economic recovery, supporting more positive investor
sentiment in the kingdom. Moreover, the tourism sectorhas begun to
show signs of life, a solidly positive sign for Morocco's
employment outlook, given the services sector has been the largest
job-creating sector inrecent years. Despite ongoing household
pessimism stemming from a weaker harvest and the governments fiscal
consolidation efforts, private consumptionshould firm as
unemployment declines and external demand improves in 2015. Beyond
merchandise trade, the Eurozone economies are a crucial source
oftourist receipts and remittances flows, both of which underpin
the consumption habits of many Moroccan households. Modestly
improved economicperformance in the Eurozone should benefit Morocco
going forward. Assuming an average harvest, we project growth to
rebound to between 4.5% and 5.0% in2015.
Data
Economic Growth Indicators
2011 2012 2013 2014 2015 2016 2017 2018
Real GDP (% change) 5.0 2.7 4.4 2.5 4.6 4.8 5.2 4.8
Real Consumer Spending (% change) 7.4 3.7 3.7 3.0 4.0 5.7 5.9
5.8
Real Government Consumption (% change) 4.6 7.9 3.7 3.0 2.8 3.4
3.2 3.2
Real Fixed Capital Formation (% change) 2.5 1.6 0.2 0.7 2.4 3.2
3.6 4.0
Real Exports of Goods and Services (% change) 2.1 2.6 2.4 5.9
4.1 4.4 5.3 5.7
Real Imports of Goods and Services (% change) 5.0 1.7 -1.5 3.0
3.8 4.1 4.3 4.5
Nominal GDP (US$ bil.) 99.2 95.9 103.8 106.7 104.9 114.5 129.3
141.0
Nominal GDP Per Capita (US$) 3,095 2,949 3,146 3,187 3,090 3,331
3,717 4,008
Historical data from selected national and international data
sources. All forecasts provided by IHS Global Insight. Table
updated on the 15th ofSource:each month from monthly forecast
update bank (GIIF). Written analysis may include references to data
made available after the release of the GIIF bank.
Consumer demand
Key points
-
2014IHS. page of 8 19
Consumer demand is expected to gradually firm in the near
term.Eurozone recovery and a strengthening tourism sector will
benefit Moroccan consumers.
Analysis
Consumer demand is expected to gradually firm in the near term.
Despite households remaining generally downbeat, with unemployment
staying high andremittances flows stagnating, private consumption
was supported by the agriculture sectors healthy performance and
some measure of pent-up demand in2013. Expanding agriculture
activity promotes rising rural wages, and since the sector accounts
for some 40% of employment, the rebound kept consumptiongrowth
afloat at 3.7%. Yet, private consumption growth has been relatively
unimpressive in recent years, largely because weakness in other key
employmentsectors (such as construction) is dampening consumer
sentiment. While government measures, including increased
public-sector wages and higher minimumwages, will continue to
support household consumption, persistent high youth unemployment,
particularly among new graduates, will at the same time be
alimiting factor.
Eurozone recovery and a strengthening tourism sector will
benefit Moroccan consumers. Economic growth prospects in the
Eurozone are slowlyimproving, with the currency bloc expected to
post annual growth in 2014 for the first time since 2011. As
Eurozone growth firms, Moroccan tourism receiptsand remittance
inflows are expected to recover after stagnating during the past
two years. Remittances, which amount to about USD7 billion every
year (about7% of GDP), effectively underpin household consumption.
As such, when remittances growth stagnates, aggregate household
income in Morocco is similarlyconstrained. Remittances are a key
financial resource for Moroccans, and it can be expected that
household consumption will be less than it otherwise wouldbe, until
remittances growth recovers significantly. The latest data show
remittances growing at only about 1% through October compared with
the same periodin 2013.
Capital investment
Key points
Investment growth has been weak in recent years, but should
begin to improve as broad economic activity accelerates in the near
term.Looking forward, the construction sector is expected to
benefit from greater infrastructure work.
Analysis
Investment growth has been weak in recent years, but should
begin to improve as broad economic activity accelerates in the near
term. Investmentgrowthmeasured as real fixed investmentslowed
considerably in 2013. As investment stutters, spending plans aimed
at ameliorating social tensionscaused by the lack of affordable
housing and low living standards for many urban Moroccans are
likely to fall by the wayside. More positively, the
governmentsinvestment spending has rebounded in 2014 after deep
cuts were made to reduce the deficit. Higher investment spending by
the government should havepositive effects for the wider investment
climate by raising investor sentiment. Moreover, IHS projects a
gradual acceleration going forward as broad economicactivity,
namely in nonagriculture sectors, rejuvenates.
Looking forward, the construction sector is expected to benefit
from greater infrastructure work, the launching of new social
housing projects, and newprojects designed to increase the capacity
of the tourism sector. Nevertheless, the government's efforts to
lead investment projects, particularly largeinfrastructure
projects, may be constrained in coming years by fiscal
considerations. At the same time, government should implement
investment promotionmeasures, while sound macroeconomic policies
and structural reforms that improve the kingdom's business
environment will make Morocco more attractive toforeign and private
investors. Investment in the development of more productive
industries, such as automotives, aerospace, and electronics will
most acutelyboost productivity by leveraging the country's supply
of labor and moving the country up the value chain. Moreover, the
free-trade agreement (FTA) with theUnited States is expected to
lead to increased investment in Morocco over the medium-term.
Labor markets
Key points
Several key employment sectors slowly emerge from slumps,
keeping unemployment elevated.Youth unemployment remains a key
challenge.
Analysis
Several key employment sectors slowly emerge from slumps,
keeping unemployment elevated. The employment situation is an issue
that continues tobring Moroccans to the streets. On 1 May 2014,
thousands demonstrated in the streets on International Workers Day.
Among the marchers were many younggraduates demanding jobs in the
public sector. Ahead of the demonstrations, the government approved
a 10% hike in the private-sector minimum wage toease tensions.
Labor unions called the increase insufficient, while employers'
groups said the hikes would erode Morocco's cost competitiveness.
With tepidconsumer price inflation, the hike will support
consumers' purchasing power. IHS expects the labor market to
gradually mend into 2015, in line with
strongernonagriculture-sector growth.
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2014IHS. page of 9 19
Youth unemployment remains a key challenge. Of the roughly one
million unemployed Moroccans, the majority (over 80%) reside in
urban areas. In otherwords, four out of five unemployed are urban
residents, and two out of three are youths, aged 1529. Unemployment
among educated youth is a particularconcern, as it remains higher
than the non-degree-holding youth unemployment rate. This is
largely a structural problem, as new graduates (first-time
jobseekers) make up the bulk of the unemployed and generally have
higher job expectations, which the labor market does not currently
satisfy. There remains apersistent skills-employment mismatch
between the private sectors employment needs and the skills of new
graduates. The kingdom's vulnerability to theagriculture sector,
which employs around 40% of the country's nearly 12-million-strong
labor force, will need to be addressed to stabilize cyclical
employmentpatterns.
Inflation
Key points
Inflation is expected to remain muted in the near term,
particularly as global oil prices have moved lower.
Analysis
Inflation is expected to remain muted in the near term,
particularly as global oil prices have moved lower. Although
Morocco took an unexpected stepin January 2014 to end gasoline and
fuel oil subsidies and start cutting diesel subsidies this year,
the key subsidies affecting most Moroccansfoodstuffs andcooking
gaswill remain in place, as they are much more politically
sensitive. This has limited the price pressure generated by this
move. For most of 2014,deflationary food prices have offset higher
inflation in nonfood categories, such as transportation and housing
costs. Weaker domestic demand on the back ofelevated unemployment
is surely playing a role by dampening demand-driven inflation.
Recently released figures showed headline annual inflation was
just0.6% in October. Given our forecast for a growth rebound,
inflation is expected to accelerate to a level more acceptable to
the central bank, averaging anannual rate of 1.7% in 2015. However,
softer global oil prices in the two-year outlook certainly add
downside risk to this forecast.
Data
Inflation Indicators
2011 2012 2013 2014 2015 2016 2017 2018
Consumer Price Index (% change) 0.9 1.3 1.9 0.4 1.7 2.1 2.5
2.7
Wholesale-Producer Price Index (% change) 14.8 4.8 -2.5 -3.2
-4.8 -3.2 0.0 -1.5
Historical data from selected national and international data
sources. All forecasts provided by IHS Global Insight. Table
updated on the 15th ofSource:each month from monthly forecast
update bank (GIIF). Written analysis may include references to data
made available after the release of the GIIF bank.
Exchange rates
Key points
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2014IHS. page of 10 19
The dirham faces modest downward pressure through 2015, stemming
from expected euro weakness.Greater exchange rate flexibility is on
the horizon, according to Moroccan officials.
Analysis
The dirham faces modest downward pressure through 2015, stemming
from expected euro weakness. IHS expects the euro to depreciate
against theUS dollar because of lower interest rates and
comparatively weaker economic performance of the Eurozone. The euro
will struggle through 2015, depreciatingfrom its current value to a
low of USD1.18 in the third quarter of 2015. It will begin to
recover thereafter, in line with firming recoveries. The Moroccan
dirhamwill broadly match these exchange-rate movements given that
it is heavily weighted toward the euro. The dirham will depreciate
to about MAD8.95/USD1.0 byyear-end 2014, although the average rate
will essentially flat owing to the euros strength earlier in the
year. Because of the economic linkages betweenMorocco and the
European Union and prospects for greater integration as Morocco is
positioned as an export hub to the EU, we expect the dirham to
followeven more closely the evolution of the euro. Although this
will translate into appreciation of the currency vis--vis the US
dollar over the medium term, webelieve that strong investment and
remittance inflows will make the resulting trade deficits
sustainable.
Greater exchange rate flexibility is on the horizon, according
to Moroccan officials. We expect the exchange-rate regime to remain
a tight managed floatin the near term, with a future goal of
increased flexibility, which will allow Morocco to better adapt to
changes in the global economy and improvecompetitiveness, in
addition to providing better protection of international reserves.
In late 2013, Moroccos central bank governor, Abdellatif Jouahri,
toldreporters that the countrys exchange-rate system would become
gradually more flexible over the next three years. Specifically, he
said the widening of thecurrency bands would be a first step.
Morocco pegs the dirham to a basket of currencies mirroring its
trade and financial relations with the European Union andthe United
States. The euro bears a much heavier weight (80%) than the US
dollar, reflecting the importance of Moroccos trade linkages with
the Eurozoneeconomies.
Data
Exchange Rate Indicators
2011 2012 2013 2014 2015 2016 2017 2018
Exchange Rate (LCU/US$, end of period) 8.58 8.43 8.15 8.95 9.13
8.72 8.57 8.45
Exchange Rate (LCU/US$, period avg) 8.09 8.63 8.41 8.40 9.14
8.91 8.58 8.49
Exchange Rate (LCU/Euro, end of period) 11.10 11.13 11.24 11.01
10.95 11.08 11.23 11.20
Exchange Rate (LCU/Euro, period avg) 11.25 11.09 11.16 11.15
10.95 11.02 11.11 11.20
Historical data from selected national and international data
sources. All forecasts provided by IHS Global Insight. Table
updated on the 15th ofSource:each month from monthly forecast
update bank (GIIF). Written analysis may include references to data
made available after the release of the GIIF bank.
Policy
-
2014IHS. page of 11 19
Monetary policy
Key points
Monetary policy will remain accommodative.The central bank is
nursing the country through a relatively soft patch.
Analysis
Monetary policy will remain accommodative. IHS expects the
monetary authority to continue to implement prudent policies,
maintaining a focus oncontaining inflation while providing adequate
liquidity to banks (liquidity has been strained by the governments
large deficits in recent years, in combinationwith expanding
external deficits drawing down hard currencies). Given downside
risks to domestic economic growth, however, the central bank will
keepmonetary policy relatively loose, and opted to cut its main
policy rate by 25 basis points to 2.75% during the latest quarterly
meeting in late September 2014.The bank previously cut its policy
rate by 25 basis points to 3.00% in early 2012, but more recently
had favored lowering the reserve ratio as a monetary policytool.
The rate-cut decision was made in light of numerous signals
indicating that inflationary pressures were muted and that growth,
particularly innonagriculture sectors, was weak. Morocco's rate cut
follows policy loosening from the European Central Bank (ECB).
Given the kingdom's economic linkagesto the Eurozone and the
dirham's heavy weighting towards the euro, the banks policy action
was not entirely unexpected. Given our forecast for a growthrebound
in 2015 and that inflation is expected to rise, IHS expects no
further policy action in the near term. We expect this rate to be
maintained through 2015and into 2016, when higher growth and a
higher global interest rate environment will lead the central bank
to begin raising rates.
Data
Monetary Policy Indicators
2011 2012 2013 2014 2015 2016 2017 2018
Policy Interest Rate (%, end of period) 3.25 3.00 3.00 2.75 2.75
3.25 3.25 3.25
Short-term Interest Rate (%, end of period) 3.76 3.83 3.91 3.83
3.64 3.71 3.96 3.96
Long-term Interest Rate (%, end of period) 4.34 4.71 5.69 5.21
5.14 5.29 5.53 5.61
Historical data from selected national and international data
sources. All forecasts provided by IHS Global Insight. Table
updated on the 15th ofSource:each month from monthly forecast
update bank (GIIF). Written analysis may include references to data
made available after the release of the GIIF bank.
Fiscal policy
Key points
The fiscal deficit has begun narrowing and is likely to continue
improving.The deficit will remain high but trend downward
gradually.
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2014IHS. page of 12 19
Analysis
The fiscal deficit has begun narrowing and is likely to continue
improving. Progress toward reducing Morocco's fiscal deficits will
continue in 2015,although gains will likely start becoming harder
to achieve, as more restrained spending or cuts to politically
sensitive subsidies (such as cooking gas) might benecessary for
bigger reductions. Further debt financing will be necessary.
Finance minister Mohamed Boussaid told Reuters recently that
external borrowingcould amount to USD2.8 billion in 2015 to cover
the fiscal shortfall. Because Morocco has taken steps towards
fiscal sustainability and has strong relations withthe
International Monetary Fund, the international debt markets will
likely continue to look favorably on the kingdom. IHS currently
projects Morocco's deficit in2015 at 4.6% of GDP, down from 4.9% in
2014. A softer oil price outlook will certainly support a lower
deficit, but not as much as it once did, now that Moroccohas
eliminated most fuel subsidies.
The deficit will remain high but trend downward gradually.
Figures showed that the fiscal deficit amounted to USD2.9 billion
during the first half of 2014, areduction from the USD4.5-billion
deficit record during the same period last year. The improvement
was largely a byproduct of fuel subsidy reform. However, alarge
part of the subsidy billfood and butane gas (cooking gas)will
remain in place, keeping the subsidy bill fairly sizable at 34% of
GDPa markedimprovement from recent years, when subsidies cost the
state upward of 7% of GDP. Despite the moderately smaller fiscal
shortfall in the first half, Moroccostill tapped international debt
markets for EUR1 billion in June 2014, fetching strong demand from
international investors hungry for favorable emerging-marketyields.
By our projections, Morocco's total public-debt load will peak at
just over 70% of GDP in the near term, before stabilizing and
gradually moving lower inthe coming years. Importantly, only about
25% of this debt is foreign debt.
Data
External sector
Key points
Morocco's external deficits will continue to narrow in the near
term.European demand will slowly return and support the external
balances.
Analysis
Morocco's external deficits will continue to narrow in the near
term. Moroccos external deficits will continue to mend going
forward, but the sizable gapswill still remain onerous for some
time. The 2014 trade deficit has declined through October, as
exports increased 8%, compared to import growth of just 1%.While
budding export industries, such as automotive and aviation cabling,
support export growth, low global prices for rock phosphate
continue to hinderphosphate exportsMoroccos primary commodity
export. In 2013, prices for the rock declined tumbled as production
rises from competitor markets resultedin excess global supply;
however, prices broadly stabilized in 2014. Autos exports are
expected to continue growing through the near-term as
domesticproduction expands and Eurozone demand slowly recovers.
Moreover, demand for fertilizers derived from phosphates should
gradually improve as globalgrowth firms. Indeed, Morocco is banking
on greater demand for the rock over the medium term as authorities
plan to nearly double phosphate production by2017, at an estimated
cost of USD15 billion. The kingdom sits atop 70% of global reserves
and is the worlds top exporter of the mineral.
European demand will slowly return and support the external
balances. Morocco's proximity to Europe and its strong ties to the
continent have benefittedthe kingdom in many ways, not least
through increased foreign direct investment (FDI). Greenfield
investments have been made by European companieslooking to set up
export bases in Morocco and take advantage of the country's
relatively less expensive labor pool. On the other hand, during the
last severalyears, particularly in 2012 as the Euro crisis
re-ignited, Morocco's reliance on the Eurozone has proved a heavy
weight on the economy. From the Moroccanconsumers' standpoint, the
Eurozone's high unemployment rates have resulted in stagnating
remittances flows back to Morocco. These flows, which amount
toabout USD7 billion every year, underpin household consumption in
Morocco, making them critical for the economy as a whole. Morocco
is fortunate thatremittances have finally started to gradually
recover. Looking forward, as the Eurozone shifts to a modest
positive growth path in 2015, these above trends willbegin to
reverse.
Data
-
2014IHS. page of 13 19
Trade and External Accounts Indicators
2011 2012 2013 2014 2015 2016 2017 2018
Exports of Goods (US$ bil.) 21.6 21.4 22.0 23.7 22.7 24.0 25.6
27.2
Imports of Goods (US$ bil.) 40.9 41.4 42.3 42.9 40.0 42.0 45.6
48.5
Trade Balance (US$ bil.) -19.3 -20.0 -20.2 -19.1 -17.3 -18.0
-20.0 -21.3
Trade Balance (% of GDP) -19.4 -20.8 -19.5 -17.9 -16.5 -15.7
-15.5 -15.1
Current Account Balance (US$ bil.) -8.0 -9.6 -7.7 -6.6 -5.5 -4.9
-6.2 -6.7
Current Account Balance (% of GDP) -8.0 -10.0 -7.5 -6.2 -5.2
-4.2 -4.8 -4.7
Historical data from selected national and international data
sources. All forecasts provided by IHS Global Insight. Table
updated on the 15th ofSource:each month from monthly forecast
update bank (GIIF). Written analysis may include references to data
made available after the release of the GIIF bank.
Key indicators and forecasts
Data (forecasts)
-
2014IHS. page of 14 19
Detailed Macro-Economic Indicators
2010 2011 2012 2013 2014 2015 2016 2017 2018
Real GDP (% change) 3.6 5.0 2.7 4.4 2.5 4.6 4.8 5.2 4.8
Nominal GDP (US$ bil.) 90.8 99.2 95.9 103.8 106.7 104.9 114.5
129.3 141.0
Nominal GDP Per Capita (US$) 2,869 3,095 2,949 3,146 3,187 3,090
3,331 3,717 4,008
Nominal GDP Per Capita (PPP$) 6,443 6,815 7,024 7,332 7,526
7,910 8,336 8,829 9,322
Real Consumer Spending (% change) 2.2 7.4 3.7 3.7 3.0 4.0 5.7
5.9 5.8
Real Fixed Capital Formation (% change) -0.7 2.5 1.6 0.2 0.7 2.4
3.2 3.6 4.0
Real Government Consumption (% change) -0.9 4.6 7.9 3.7 3.0 2.8
3.4 3.2 3.2
Real Imports of Goods and Services (% change) 3.6 5.0 1.7 -1.5
3.0 3.8 4.1 4.3 4.5
Real Exports of Goods and Services (% change) 16.6 2.1 2.6 2.4
5.9 4.1 4.4 5.3 5.7
Industrial Production Index (% change) 1.8 2.3 1.4 1.0 0.5 2.2
3.0 4.9 4.2
Consumer Price Index (% change) 1.0 0.9 1.3 1.9 0.4 1.7 2.1 2.5
2.7
Wholesale-Producer Price Index (% change) 6.4 14.8 4.8 -2.5 -3.2
-4.8 -3.2 0.0 -1.5
Policy Interest Rate (%) 3.25 3.25 3.00 3.00 2.75 2.75 3.25 3.25
3.25
Short-term Interest Rate (%) 3.69 3.76 3.83 3.91 3.83 3.64 3.71
3.96 3.96
Long-term Interest Rate (%) 4.40 4.34 4.71 5.69 5.21 5.14 5.29
5.53 5.61
Fiscal Balance (% of GDP) -4.7 -6.7 -7.4 -5.5 -4.9 -4.6 -4.0
-3.5 -3.2
Population (mil.) 31.64 32.06 32.52 33.01 33.49 33.96 34.39
34.79 35.18
Population (% change) 1.2 1.3 1.4 1.5 1.5 1.4 1.3 1.2 1.1
Unemployment Rate (%) 9.1 8.8 9.0 9.2 9.5 9.1 8.8 8.6 8.4
Current Account Balance (US$ bil.) -4.1 -8.0 -9.6 -7.7 -6.6 -5.5
-4.9 -6.2 -6.7
Current Account Balance (% of GDP) -4.5 -8.0 -10.0 -7.5 -6.2
-5.2 -4.2 -4.8 -4.7
Trade Balance (US$ bil.) -15.0 -19.3 -20.0 -20.2 -19.1 -17.3
-18.0 -20.0 -21.3
Trade Balance (% of GDP) -16.5 -19.4 -20.8 -19.5 -17.9 -16.5
-15.7 -15.5 -15.1
BOP Exports of Goods US$bn 17.8 21.6 21.4 22.0 23.7 22.7 24.0
25.6 27.2
BOP Imports of Goods US$bn 32.7 40.9 41.4 42.3 42.9 40.0 42.0
45.6 48.5
Exchange Rate (LCU/US$, end of period) 8.36 8.58 8.43 8.15 8.95
9.13 8.72 8.57 8.45
Exchange Rate (LCU/Yen, end of period) 0.10 0.11 0.10 0.08 0.08
0.08 0.07 0.07 0.07
Exchange Rate (LCU/Euro, end of period) 11.17 11.10 11.13 11.24
11.01 10.95 11.08 11.23 11.20
Historical data from selected national and international data
sources. All forecasts provided by IHS Global Insight. Table
updated on the 15th ofSource:each month from monthly forecast
update bank (GIIF). Written analysis may include references to data
made available after the release of the GIIF bank.
Debt Indicators
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Foreign Exchange Earnings (US$ bil.) 32.6 36.7 42.8 41.7 42.1
45.8 47.6 50.2 52.9 56.5
Portfolio Investment, Net (US$ bil.) 0.0 0.1 0.6 -0.2 -0.1 -0.1
-0.1 -0.2 -0.2 -0.2
Portfolio Investment, Net (% of GDP) 0.0 0.1 0.6 -0.2 -0.1 -0.1
-0.1 -0.1 -0.1 -0.1
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2014IHS. page of 15 19
Foreign Direct Investment, Net (US$ bil.) 1.5 1.0 2.4 2.5 3.2
3.4 3.6 3.9 4.1 4.2
Foreign Direct Investment, Net (% of GDP) 1.6 1.1 2.4 2.6 3.0
3.1 3.1 3.1 3.0 2.8
Foreign Exchange Reserves, Excl. Gold (US$ bil.) 22.8 22.6 19.5
16.4 18.4 20.5 21.4 21.7 22.2 19.5
Import Cover (Months) 7.3 6.8 4.7 4.0 4.4 4.6 4.8 4.6 4.4
3.6
Total External Debt (US$ bil.) 25.3 27.0 29.6 33.2 40.5 45.3
47.8 49.8 52.0 53.2
Total External Debt (% of GDP) 27.8 29.8 29.8 34.6 39.0 40.9
41.1 39.2 37.6 35.5
Total External Debt (% of forex earnings) 77.4 73.6 69.1 79.7
96.2 99.1 100.4 99.2 98.3 94.1
Short Term External Debt (US$ bil.) 2.2 1.8 3.0 3.4 4.0 4.4 4.6
4.7 4.8 4.8
Short Term External Debt (% of total external debt) 8.6 6.7 10.2
10.1 9.9 9.7 9.5 9.4 9.2 9.0
Short Term External Debt (% of international reserves) 9.6 8.0
15.5 20.6 21.9 21.5 21.4 21.4 21.5 24.5
Total External Debt Service (US$ bil.) 3.4 3.3 3.2 4.3 4.8 4.7
4.7 4.7 4.8 4.6
Interest Payment Arrears (US$ bil.) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0
External Liquidity Gap (% of forex earnings) 22.4 16.9 28.1 37.0
33.4 31.3 28.8 29.0 28.9 26.8
Historical data from selected national and international data
sources. All forecasts provided by IHS Global Insight. Table
updated live from quarterlySource:Sovereign Risk forecast bank
(SRS).
Key facts and demographicsArea: 446,550 km2 (172, 400 sq
miles)
Language: Arabic & Amazigh Berber (official), French
Religion: Islam
Time Zone: GMT
Population: 32,270,000 (2011 World Bank)
Neighbours: Algeria, Spain (Ceuta and Melilla enclaves), Western
Sahara (under Moroccan occupation to Mauritanian frontier)
Capital City: Rabat
Primary Port: Casablanca
Primary Airport: Casablanca Mohammed V International
Currency: Moroccan dirham (MAD)
External trade
OverviewAlthough small, Morocco's trade with the other countries
of the Arab Maghreb Union is growing (it rose from just over USD1
billion in 2004 to about USD2billion in 2008). Moreover, trade
exchanges between Morocco and the United States have more than
doubled since the entry into force of the free-tradeagreement (FTA)
between the two countries in January 2006, making the United States
the third-largest supplier of Morocco by 2011. A substantial
deficit onthe trading account is balanced by service earnings and
repatriated income. Despite continued trade deficits, the currency
was found by the InternationalMonetary Fund not to be misaligned.
Merchandise exports are focused on agricultural and processed food
products, around a third of exports. Other key exportgroups include
simple manufactures and semi-processed goods, notably clothes and
footwear. Principal import groups are structured around capital
andtransport equipment (around one-fifth of the total), oil and
fuel products, chemicals, metals, and agricultural products,
notably cereals.
DataMorocco: Major Trading Partners, 2013
EXPORTS IMPORTS
-
2014IHS. page of 16 19
Country Billions of USD Percent Share Country Billions of USD
Percent Share
France 4.5 20.9 Spain 6.3 14.0
Spain 4.3 19.9 France 5.7 12.7
Brazil 1.2 5.8 China 3.2 7.1
United States 0.9 4.0 United States 3.1 6.9
Italy 0.8 3.8 Saudi Arabia 2.9 6.5
India 0.8 3.6 Italy 2.4 5.3
Belgium 0.6 2.9 Germany 2.1 4.7
United Kingdom 0.6 2.8 Russia 2.0 4.5
Netherlands 0.6 2.7 Turkey 1.3 3.0
Germany 0.6 2.7 Algeria 1.2 2.7
Source: IMF, Direction of Trade
Morocco: Major Trading Partners, 2000
EXPORTS IMPORTS
Country Billions of USD Percent Share Country Billions of USD
Percent Share
France 2.5 33.5 France 2.8 24.0
Spain 1.0 13.0 Spain 1.1 9.9
United Kingdom 0.7 9.6 United Kingdom 0.7 6.2
Italy 0.5 7.1 United States 0.6 5.6
Germany 0.4 5.0 Saudi Arabia 0.6 5.0
India 0.3 4.2 Germany 0.6 4.9
Japan 0.3 3.8 Italy 0.5 4.7
United States 0.3 3.4 Iraq 0.5 4.1
Netherlands 0.1 1.7 Iran 0.4 3.1
Brazil 0.1 0.9 China 0.3 2.3
Source: IMF, Direction of Trade
Economic development
OverviewThe period of government reform programmes, which dates
from the early 1980s, has been critical in attaining macroeconomic
stability. Since theearly 1980s, the government has pursued an
economic program toward these objectives with the support of the
International Monetary Fund (IMF), the WorldBank, and the Paris
Club of creditors. Into the 1990s, the authorities achieved a
low-inflation economy, with sustainable external and internal
balances. Themacroeconomic stability achieved by the authorities
has helped the economy develop a number of strengthsnotably in
tourism, some in industry, phosphateproduction, fishing, and
foreign remittances.
Nevertheless, a number of weaknesses have pinned GDP growth
back, however, most notably the dependency of the economy on
agriculturaloutput. The cyclical dependency on agriculture sees GDP
growth fluctuate significantly according to climatic conditions.
Around 40% of the population makesits living working in the
agriculture sector. As a result, GDP growth has failed to keep pace
sufficiently with population growth so that incomes per head
barelygrew over the 1990s, while the level of unemployment grew.
Official estimates put the unemployment rate at 8.9% in 2011, a
modest improvement from 9.1%in both 2009 and 2010. To have a real
influence on the country's material well-being and to bring down
unemployment, GDP growth needs to achieve around67% per year on a
consistent basis. Drought years have severely affected headline GDP
in the past.
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2014IHS. page of 17 19
In 1983, Morocco adopted a structural reform policy, easing away
from state domination of the economy. The strategy was aimed at
economicdiversification and encouraging foreign investment. The
sale of state assets began in earnest in 1992. Subsequently, the
state has divested itself of a numberof its interests. Accompanying
privatisation initiatives from the 1980s onward has been a raft of
reforms undertaken in line with IMF agreements, includinglowering
import tariffs, banking-sector reform, tax reform, and a
liberalisation of currency controls. The current account is fully
liberalized, with a partialliberalisation of the capital account
allowing foreign investors to repatriate profits in foreign
currencies.
The government has acknowledged that the key reform required in
recent years is to address deterioration in the country's fiscal
balance. Thegovernment agreed with the IMF in 2003 to an economic
program designed to reduce public-sector wage costs. A number of
strategies are in play to help easethe potential currency pressures
that could be derived from the country's trade deficit. The
government is seeking to develop free-trade relationships with
keypartners, particularly in Europe. The reaching of an Association
Agreement with the European Union (EU), which came into force in
March 2000, is aimed atthe establishment of a free-trade zone
between Morocco and the EU. By 2012, the EU-Morocco free trade area
for industrial products had come into effect andprogressive
liberalisation of agriculture trade was underway. In 2003,
negotiations were opened on a free-trade agreement (FTA) with the
United States,providing a second push for trade liberalization. The
US-Morocco FTA took effect 1 July 2005. Meanwhile, the authorities
have been keen in recent years toencourage privatisation and have
been active in seeking to reduce long-term state liabilities,
particularly in pensions.
Labor marketsThe unemployment rate has been trending down in
recent years. Morocco's total population stood at around 32 million
people in 2010, growing at about1% annually. Of the population, 28%
were below the age of 15 and only 5% were over 65 years of age. The
population is fairly evenly distributed between ruraland urban
areas, although increasingly the rural population is migrating to
urban centers. It is also evenly distributed in terms of gender,
with a male-femaleratio of 1. Average life expectancy is 70 years.
The unemployment rate has, on average, been trending down from a
peak of 22.9% in 1995 to 8.9% in 2011.The bulk of new jobs created
are in the services sector.
Morocco's labour force has increased to around 12 million.
Unskilled labour is readily available given the high numbers of
unemployed, and wages aregenerally low. To be sure, low wages and
increasingly few job opportunities have seen large numbers of
high-skilled workers, graduates and professionalsleave to work
abroad, mainly to Spain and France. The Moroccan government is
under increasing pressure to take the relevant measures to create
jobs andsatisfy the workforce at home, particularly now given the
social unrest currently gripping the region.
A new labour code was adopted in 2003. The economy still faces
many structural problems, but the adoption of the new labour code
in July 2003 was a stepforward. The new labour code was designed to
regulate labour relations, ensure social peace, and attract
domestic and foreign investment by increasingemployment flexibility
and reducing red tape. It described workers and unions' rights and
provided for collective negotiations over terms and conditions. It
isalso introduced a reconciliation procedure for labour conflicts
at national, regional, and local levels. Finally, it reduced the
number of work hours from 48 to 44per week, increased maternity
leave from 12 to 14 weeks, and established the trial period at
three months for managers, one-and-a-half months for
mid-levelemployees, and 15 days for workers.
Monetary systemThe central bank (Bank al-Maghrib) adjusts, on a
daily basis, the rate of exchange of the dirham with respect to a
basket of 20 foreign currencies. The weightof the US dollar within
that basket saw the dirham appreciate against the euro during the
dollar's strong run over the late 1990s, decreasing the
competitiveposition of exports. The basket was rebalanced in 2002
to take greater account of the euro, leading to an effective 5%
depreciation in the trade-weighted valueof the currency. The
further weakening of the dollar over 2002 and into 2003 worked to
the advantage of the Moroccan economy, with principle export
marketslying in Europe. Monetary policy used to be executed by the
Ministry of Finance and the Bank al-Maghrib. In 2005, the central
bank was given greaterautonomy in the conduct of monetary policy.
As of February 1993, the Moroccan dirham was made convertible for
all current transactions and for some capitaltransactions, notably,
capital repatriation by foreign investors. Foreign exchange is
routinely available through commercial banks for such transactions.
Theboard of the central bank meets quarterly to set the key
benchmark rate, as well as make decisions regarding the required
reserve ratio.
Financial systemThe system is supervised by the central bank
(Bank al-Maghrib), the sole authority to which banks are
responsible. The government introduced a series ofreforms into the
sector in the early 1990s, which saw it transform into one of the
most modern and efficient banking systems in North Africa. Around
15 banksexist within the country, with only 2 banks remaining in
the public sector: the BMCE, the country's export bank, and the
Credit Populaire, which specialises inproviding financing to small
and medium-sized businesses. French, Italian, Dutch, and German
banks all participate within the banking system. The keychallenge
for the authorities is to address two specialist state-owned banks,
exempt from a number of legislative measures implemented elsewhere.
Mostcommercial banks appear to have the necessary capital and
structures to appear robust. The Casablanca Stock Exchange is the
single stock exchange in thecountry; the exchange is small, but
relatively lively, with full electronic trading. Market
capitalization, which stood at USD13.5 billion in 2004, rose to
more thanUSD50 billion in 2012.
Natural resourcesAgricultural land in Morocco is constrained by
its proximity to water, with drought having a serious effect on
agricultural production.
Fishing potential in the kingdom is considerable, both in the
Atlantic and Mediterranean, with the authorities having sold
licenses to overseas operators.
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2014IHS. page of 18 19
Morocco has the world's largest reserves of phosphate rock,
around three-fourths of total known reserves. Phosphates are
overwhelmingly the largest singlemined product in the country,
although there are small deposits of other minerals.
Morocco is dependent on imports for the vast majority of its oil
needs. It is hoped that explorations near the Algerian border may
yield oil fields that will becomeeconomically efficient, but
currently the kingdom relies on imports to cover about 90% of its
oil requirements. There are small oil and coal deposits.
Tourist attractions are numerous, including the cities of
Marrakesh and Casablanca, together with areas of outstanding
natural beauty, notably the high AtlasMountains. The Arab Spring
uprisings adversely affected tourist volume and by mid-2012, it had
only sluggishly started to recover.
Key sectorsAgriculture: An estimated 40% of the workforce is
employed in agriculture, and the sector accounts for approximately
30% of total exports. Agriculture isvulnerable to drought, and its
contribution to GDP can vary dramatically. Agricultural development
has been hampered by the prevalence of small-sizedholdings, low
mechanization, insufficient investment, and restrictions on access
to European Union (EU) markets. These restrictions should ease as
thecountry makes progress as part of its Association Agreement with
the EU. Long-term development plans have been drawn up by the
government, includingirrigation projects and incentives for
farmers, including debt write-offs for small farms. The sector is
likely to face additional challenges as a result of US
marketpenetration following the conclusion of a US-Moroccan
free-trade agreement.
Tourism: This sector accounts for around 8% of GDP and is one of
the largest foreign-exchange earners. Travel costs to the country
were significantlyreduced in 1995, following cuts in prices by the
national airline, Royal Air Maroc. The country is becoming an
increasingly competitive destination for Europeantravel, with
policing of brazen solicitors and salesmen hassling tourists
stepped up in a bid to attract greater numbers of tourists. The
government is currentlycommitted to large-scale investment in the
tourism sector. It has targeted a boost in tourist visitor numbers
to 10.0 million, from 2.5 million in 2001.
Phosphates and mining: Additional foreign currency revenues come
from phosphate mining, which is controlled by state-owned Office
Cherifien desPhosphates. Morocco is the world's third-largest
producer of phosphates and is estimated to hold nearly 75% of the
world's known phosphate reserves. Largequantities of fertilizers
and phosphoric acid are produced. The government is keen to expand
mining and processing operations, particularly throughjoint-venture
projects with European and Asian companies. Investors in the
phosphate industry would particularly welcome a resolution of the
issue of WesternSahara's sovereignty, preferably in Morocco's
favor, enabling investment to proceed without the threat of renewed
security risks.
Fishing: New fishing ports are planned as part of the
government's aim to increase the sector's contribution to GDP.
Major investment is also expected tomodernise the existing fleet of
fishing boats, upgrade ports, and add value to fishing resources
through handling and processing services. The recentagreement
between the EU and Morocco took effect 1 June 2006 and will last
four years. It covered 119 vessels, mostly from France, Spain, and
Portugal,although it also included a 60,000-tonne quota for
industrial pelagic fishing for several northern European fleets.
The annual financial contribution is set atEUR36.1 million, making
this agreement the most valuable of all EU fishing agreements.
Oil and gas: Morocco is traditionally a net importer of oil (90%
is imported), with the exception of 200 barrels per day currently
produced in the EssaouiraBasin. The hydrocarbons law was reformed
in December 1999, offering new incentives to potential investors.
These include a 10-year tax break to offshoreproduction companies
and the reduction of state-held stakes in oil concessions to a
maximum 25%.
Key sectors dataMorocco: Top-10 Sectors Ranked by Value
Added
2013 Level 2014 Percent Change Percent Share of GDP
(Bil. US$) (Real terms) (Nominal terms)
1. Agriculture 15.6 1.8 15.5
2. Public Admin. & Defense 9.2 5.7 9.1
3. Construction 6.0 1.6 5.9
4. Retail trade - total 5.5 2.6 5.4
5. Real estate 5.0 3.1 4.9
6. Health and social services 4.4 5.0 4.4
7. Wholesale trade 4.4 3.2 4.4
8. Business services 4.3 3.4 4.3
9. Banking & related financial 3.8 4.4 3.8
10. Education 3.2 4.7 3.2
Top-10 Total 61.4 60.9
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2014IHS. page of 19 19
Source: World Industry Service, IHS Global Insight, Inc.
Updated: 16 Oct 2014
HighlightsEntrenched parochial interests will continue to hinder
Morocco's Islamist-led government's efforts to introduce rapid
legal and administrative reforms, and tohold true to its commitment
to crack down on endemic corruption. Instead, improvements to the
generally favourable investment environment are likely toprogress
slowly but steadily over the next year. These will be supported by
international agreements, including the EU-Morocco Association
Agreement andMorocco's FTA with the United States. Presently, weak
external demand out of Europe is weighing heavily on Morocco's
economy through lower touristreceipts and remittances inflows, in
addition to dampening goods exports. In addition, elevated oil
prices, albeit cooling compared to record highs in 201112,are also
straining the kingdom's accounts (external and fiscal) as domestic
energy demands rise and subsidies remain overly generous and
inefficient. Ingeneral, however, Morocco's economic prospects are
favourable compared to regional competitors thanks to prudent
economic policies, good relations withtrading partners, and an open
economy. Politically, the risk environment is expected to remain
stable under the leadership of King Mohammed VI, who
remainsrelatively popular and has forged ahead with gradual
socio-economic improvements as well as constitutional reforms
designed to mollify pro-democracyprotestors. Despite effective and
proactive security forces, there remains a moderate threat of
attack by militant Islamists, particularly against
governmentbuildings and tourist sites in Morocco's commercial
capital of Casablanca. Youth unemployment remains a significant
problem, creating fertile ground for therecruitment of young
Moroccans by militant Islamist movements fighting in Syria and the
Sahel. The protracted territorial dispute between Morocco and
theAlgerian-backed Polisario Front over control of the
phosphate-rich territory of Western Sahara is highly unlikely to be
resolved anytime soon. The Polisariorejects Moroccan offers of
autonomy, reiterating calls for a referendum on the status of the
territory. This contributes to an increased risk of civil unrest in
theterritory should offshore oil-drilling commence as planned in
2014.
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