A feature story in Morocco World News highlighted the positive changes in the Moroccan economy during the reign of King Mohammed VI. As it noted, “Since the 2000s, the kingdom’s GDP has practically doubled to hit all-time records. Not only has this newfound wealth helped the country reduce its poverty rate by half, but it has also set Morocco on the road to become one of the leading developing countries in the region.”
The article attributes these changes to the government’s new approach and mentality towards business since the enthronement of the King. At the time of his accession in 1999, Morocco was very much a quasi-statist economy, a failing model that the King wasted no time in challenging. He immediately began the process of building an extensive base for attracting international investors by investing heavily in upgrading and updating Morocco infrastructure – ports, airports, highways, and access to services.
Unlike previous reliance on tourism and agriculture, with some attention to textiles, the new Morocco sought to both enhance those industries through national plans to make them globally competitive and introduce industrialization based on its competitive advantage in wages and human resources. It also anticipated the fallout from the global financial crisis of 2008 by redirecting its trading activities towards Africa, which will double its population by 2050.
Now that the country’s industrial base is expanding rapidly, the King wants to extend those benefits more evenly throughout the country by promoting free zones and industrial cities in different locations and providing incentives to attract investors. There is no better example of this than the strategy to build industrial supply-chain clusters to support its manufacturing sectors.
This proactive industrialization policy would not have been as broadly successful had not Morocco revamped its economic policies. “Over the past two decades, Morocco has taken important steps to liberalize its economy. It has implemented various incentives to attract investors, signing free trade agreements and opening up new markets. The reign of Mohammed VI is synonymous with the opening of the Moroccan economy,” according to the article.
Other proactive steps taken by the government include the soon-to-be-adopted flexible exchange rate. This will make it possible to link the exchange rate to the domestic economy, rather than be subject to the vagaries of external currencies, giving Morocco more leeway in managing fiscal and monetary policies. The analysis points out that “The liberalization of the Moroccan economy has provided positive elements in terms of the growth of national GDP, the development of foreign direct investment, the emergence of a middle class, and the modernization of the agriculture and industry and services.”
Key factors the article notes that enabled Morocco’s success include political stability, human resources, low production costs, geographic location, and consistent economic growth. “At the same time, Morocco has embarked on numerous reforms to improve its business climate. An efficient regulatory framework, investment incentives, the fight against tax evasion, the modernization of the financial sector, encouragement of entrepreneurship, and more, are all projects upon which Morocco has capitalized.”
News on the Banking front
Additional insights into Morocco’s financial capacity were provided by the governor of the central bank, Bank Al-Maghrib (BAM), Abdellatif Jouahri, in his presentation to the King of BAM’s annual report on the economic, monetary, and fiscal outlook for the country.
Against the backdrop of last year’s weak performance of the agricultural sector due to a devastating drought, Morocco is making an impressive turnaround in 2017. International reserves are growing despite a slight uptick in the current account deficit (trade imbalance). To counter this, BAM has cut its key interest rate to 2¼% and is continuing its program to provide financing to micro, small, and medium-sized enterprises to enable job growth.
Other positive results are the continued growth of the banking sector in Africa, and the capacity of the key banks to manage risks associated with expansion and diversification of services. A new banking law has been implemented, and the regulatory framework is being finalized.
The article noted that the governor pointed out that “Despite the continuing high level of investment, the various sectoral strategies launched in recent years, and the measures taken to improve the business climate, the economy has not yet found the right trajectory and the development model to permanently place it on a path to higher growth…He said it is imperative to initiate a new generation of reforms to improve productivity and strengthen the resilience of the economy amid an uncertain international environment.”
Jouahri further noted that higher growth rates are needed to meet the challenges of high unemployment, and this must be accompanied by reforms in education and training to better match market needs. He echoed the King’s insistence on more inclusive economic growth based on policies of equal opportunity, reducing barriers to economic participation, and upgrading social and economic conditions throughout the country.