Economy and Trade
Morocco has achieved considerable economic progress over the past 30 years. Since the 1970s, gross national income per person has more than quadrupled from US$550 to US$2,300, while average life expectancy has increased from 55 in 1970 to 72.4 in 2007, according to the World Bank. The institution also says that Morocco is one of the leading economic reformers in the Middle East and North Africa region and that this reflects “a clear ambition to project Morocco to new heights in terms of competitiveness and growth.”
Morocco has the world’s biggest phosphate reserves, a large tourist industry, and a growing manufacturing sector. However, agriculture accounts for about 20% of GDP and employs roughly 40% of the labor force. Agriculture is highly dependent on rainfall, which can vary considerably from year to year. Morocco’s trade is oriented towards the European Union, which buys around two-thirds of Moroccan exports. Major imports include oil, wheat, consumer goods and capital goods.
Economic Policy over 12 Months
The government’s economic strategy is to shift the economy away from its dependence upon agriculture and to create jobs and find new engines of growth. It has thus followed a policy of reform, liberalization, and modernization aimed at stimulating growth and creating jobs. Morocco needs to accelerate growth to reduce high levels of unemployment and underemployment. While overall unemployment stands at 7.7%, this figure masks significantly higher urban unemployment, as high as 33% among urban youth.
In November 2008, Parliament approved the 2009 budget, which includes a sharp increase in government investment, intended to bolster domestic demand. The state High Planning Commission expects the government to post a budget deficit of 2.9% of GDP in 2009, following a surplus in the previous two years, reflecting the increased government spending. Total government debt amounted to 54% of GDP at the end of 2007, down from 58% in 2006 (external public and publicly guaranteed debt remained at around 20% of GDP).
The government remains committed to containing the budget deficit to no more than 3% of GDP over the medium term. It aims to maintain sound expenditure controls, to reorient spending toward investment and education, to strengthen tax administration further, and to simplify the tax regime, as well as to manage its debt prudently. The authorities also intend to target subsidies at the poorest sections of the population, and thus gradually unwind universal subsidies. These reforms will be introduced in 2009.
In 2008, monetary policy remained geared toward maintaining low and stable inflation, in the context of the pegged exchange rate. Indeed, the central bank raised its benchmark interest rate by a quarter of a percentage point to 3.5% in September 2008, citing concerns about inflation, and it maintained the rate at that level for the remainder of the year. Prior to September’s increase, the key policy rate had been unchanged since early 2007.
Morocco’s financial system is sound and well managed, and has avoided the problems seen in many advanced economies. Banks are generally well provisioned and have little foreign exposure on either the asset or liability side, minimizing the transmission of risks from global financial markets to the real economy, the International Monetary Fund (IMF) reported in 2008. The IMF added that the authorities have continued to improve supervision, with a view to monitoring risks more closely as the economy becomes more open.
Economic Performance over 12 Months
The economy rebounded in 2008, growing by 5.8% after expanding by 2.7% in the previous year, when a drought afflicted the key agricultural sector. The level of rainfall doubled in 2008, boosting crop production and farm incomes over 2007. Indeed, overall private consumption grew by 7.8% in 2008, up from 3.8% in 2007. Non-agricultural sectors such as telecommunications, financial services, and construction also experienced vigorous growth.
Moroccan exports performed well in the first half of 2008 before dropping 16% in the fourth quarter from the previous three months as demand for phosphates tumbled in the face of slowing global growth. Other key exports, namely tailored clothing, hosiery and electronic parts, also fell sharply in the second half of the year. Tourism, measured by hotel occupancy, was down 2.3% in the first 11 months of 2008 after years of strong growth. Rising unemployment in key tourism markets such as the United Kingdom hit demand.
In February 2009, the state High Planning Commission said that the global economic crisis is also depressing foreign investment, which reached 31.7 billion Moroccan dirhams (US$3.72 billion) in 2008 but is expected to fall by 37% in 2009. The Commission also anticipated that tourism revenue and worker expatriate remittances, Morocco’s key foreign-currency earners, would decline by 3.5% and 5.0%, respectively, in 2009. It further forecast that the country’s current account deficit would widen to 5.7% as a proportion of GDP in 2009, from 4.6% in 2008.
Inflation jumped sharply in 2008 on the back of rising commodity prices. Consumer prices increased by 3.9% over the year, up two percentage points in 2007. Food price inflation amounted to 6.8% overall in 2008, after reaching a high of 9.1% in July. Policies to control domestic prices—such as food and fuel subsidies—kept inflation relatively low compared with many countries in the region. However, the cost of these subsidies has tripled in two years, reaching close to 6% of GDP in 2008.
Support for Inward Investment and Imports
The government’s Investment Office can help potential investors. It provides economic, financial, or statutory information needed for realising investment projects, of whatever size, in Morocco. It can also advise on the advantages of foreign investment legislation. These services, available in English, are provided free of charge. Contact details are as follows:
The Investment Office
Direction des Investissements Exterieurs
Angle Avenue Michelifen et Rue Hounain
4th Floor, Agdal
Rabat
Morocco
Tel: +212 37 673375 or +212 7 673420/1
Fax: +212 37 673417/42
The government has also established regional investment centres in 16 cities, including Casablanca, Rabat, Marrakech, Fes, Meknes, Agadir, Settat, Tangier, Oujda, Kenitra, and Safi.
For information on the government’s import policy, please see the website of the Moroccan customs service: www.douane.gov.ma.
Tax Exemptions
The government has sought to reduce the plethora of tax exemptions and incentives in favor of a low corporate tax rate. Information about the numerous incentives that still exist can be obtained from the Investment Office detailed above.
Statistics
GDP growth: 5.8% (2008 est.)
GDP per capita: US$4,000 (2008 est.)
CPI: 4.6% (2008 est.)
Key interest rate: Central bank discount rate 3.25% (31 December 2007)
Exchange rate versus dollar: Moroccan dirhams (MAD) per US dollar—7.526 (2008 est.),
Unemployment: 2.1% (2008 est.)
FDI: US$35.36 billion (2008 est.)
Current account deficit/surplus −US$1.667 billion (2008 est.)
Population: 34,343,220 (July 2008 est.)
Source: CIA World Factbook except where stated
www.qfinance.com