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 (MENA) 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 toward 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. Although overall unemployment stands at around 10%, this figure masks significantly higher urban unemployment, as high as 33% among urban youth.
Morocco’s government has increased spending on basic infrastructure to MD400 billion for 2008–2012, from MD80 billion in the previous period. The investment aims to upgrade basic infrastructure, including the highway network, power grids, ports and airports, the farming sector, and telecoms.
In 2009, the government loosened fiscal policy in response to the global downturn, while proceeding with reforms that included tax rate reductions and increases in wages for the lower end of the civil servant salary scale. Revenue fell sharply—reflecting the economic downturn, tax policy changes, and the absence of certain one-off factors present in 2008—but this was in part offset by a fall in subsidies due to lower world commodity prices.
In 2009, monetary policy remained geared toward maintaining low and stable inflation, in the context of the pegged exchange rate. The central bank lowered its benchmark interest rate by a quarter of a percentage point to 3.25%, reflecting easing inflationary pressures. The central bank sought to boost liquidity by gradually reducing reserve requirements from 15% to 8% in 2009. In April 2010, it lowered reserve requirements further to 6%, while maintaining interest rates at 3.25%.
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 reported in 2010.
Economic Performance over 12 Months
The economy rebounded in 2008, growing by 5.6%; this compared to growth of 2.7% in the previous year, in which 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. Nonagricultural sectors such as telecommunications, financial services, and construction also experienced vigorous growth.
The economy expanded by 7.8% in the final quarter of 2009, as a record grain harvest boosted domestic consumer demand and export industries began to recover from the global downturn. This growth in GDP compares to 3.1% in the same quarter a year earlier, the state High Planning Commission said in a statement. Overall, the economy expanded by 5.1% in 2009, down from 5.6% in 2008.
Nonfarm GDP growth was 4.9%, up from 1.4% in the last three months of 2008, as manufacturing industries resumed growing and construction sector growth accelerated. Moroccan industry relies heavily on trade with the eurozone, where recession in 2009 led consumers to tighten their belts and factories to cut output. The central bank expects the economy to grow by 3–4% in 2011, despite a fall in farm income after the record cereals harvest seen in 2009.
Inflation fell to 0.5% in 2009, down from 3.9% in 2008, when it reached its highest level in a decade due to high food and energy prices. Food prices account for more than 40% of the inflation gauge.
In March 2010, the credit ratings agency Standard & Poor’s raised Morocco’s long and short-term foreign currency sovereign credit ratings to BBB– and A-3 respectively, citing increased economic flexibility. Standard & Poor’s also raised Morocco’s long-term local currency credit rating to BBB+ from BBB on March 23, and its short-term local currency credit rating to A-2 from A-3. The upgrade reflects the organization’s view of the Moroccan government’s improved economic policy flexibility as a result of its track record in reducing the country’s fiscal and external debt burdens over the past decade.
Morocco’s combined foreign and domestic debt stock has been slashed as a proportion of GDP, to 48% in 2009 from 68% in 1998.
Support for Inward Investment and Imports
The government’s Investment Office can help potential investors. It provides economic, financial, and statutory information for realizing 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 centers 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.
Statistics
GDP growth: 5.1% (official, 2009)
GDP per capita: US$4,600 (2009 est.)
CPI: 0.5% (official, 2009)
Key interest rate: 3.25% (central bank discount rate, April 2010)
Exchange rate versus US dollar: MD8.064 (2009)*
Unemployment: 9.9% (2009 est.)
FDI: US$42.68 billion (December 31, 2009 est.)
Current account deficit/surplus: −US$3.795 billion (2009 est.)
Population: 31,627,428 (July 2010 est.)
* Moroccan dirham
Source: CIA World Factbook except where stated
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