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Business Brief: Economic Outlook Mixed with Good News in Tourism and from IMF Assessment while Personal Income Continues to Lag Overall Economic Growth – Jean R. AbiNader

Jean R. AbiNaderMATIC
January 29, 2018

Jean R. AbiNader, Exec. Dir., Moroccan American Trade and Investment Center

Jean R. AbiNader, Exec. Dir., Moroccan American Trade and Investment Center

Morocco has to do better for its citizens according to Nizar Baraka, speaking in his capacity as President of the Economic, Social, and Environmental Council (CESE). Using the cost of bottled gas as an example, he pointed out that in urban areas the cost was around $5 and it could more than $7.50, even as high as $10.80 in inclement weather. He made this comparison to point out the “poor distribution of wealth” and the lack of “social equity between regions” in a speech to Parliament earlier this month.

Baraka noted that despite large amounts of foreign investment, employment growth has not kept pace. While there has certainly been an uptick in high value jobs such as in industrial manufacturing, the overall growth of semi-skilled jobs at more than marginal salaries has not matched the number of job seekers. More than 40% of the workforce is still engaged in seasonal agricultural employment while the informal sector continues to absorb many of the unemployed. So despite an incredible effort to achieve satisfactory performance in meeting the Millennium Development Goals, the government has not yet found a satisfactory strategy to reduce the dysfunctional impact of seasonal employment, investments in capital intensive industries, and uneven support for micro-, small and medium sized enterprises.

Baraka warned that the bottom line is that Morocco will not be able to meet the challenge of becoming a middle-income country by 2030, “Despite the efforts that the country will be able to deploy, unless it changes its development model. Indeed, he noted, today, the nature of the demands and social expectations has changed, as has the way society consumes, which means that, despite improved incomes, the change remains imperceptible to the citizens,” according to the article in Le360.

The article noted that “According to the recent study by the EESC and Bank Al Maghrib, the overall wealth of Morocco more than doubled between 1999 and 2013, from 5.904 billion dirhams [$642 million] to 12.833 billion dirhams [$14 billion], which represents an average annual increase of 5%. However, despite this substantial increase, Morocco is likely to experience more social disputes, particularly because of the worrying number of unemployed, of which no less than 1.7 million have never attended school. The fact that the average Moroccan barely reads two minutes a day considerably reduces his creative and innovative skills, especially since 40% of young people can neither read nor write.”

So despite the reduction in the poverty rate from 15.3% to 4.2%, illiteracy from 48% to 32%,
and the housing deficit by 50%, with much greater access to primary school, electricity, and potable water, many Moroccans feel left out of the benefits of the country’s progress due to a lack of meaningful employment.

IMF again certifies Morocco’s performance under its guidelines for the Precautionary and Liquidity Line (PLL) based on its third and final review under the most recent arrangement. The PLL essentially acts as a line of credit for countries to avoid budget dislocations due to reforms. The report included recommendations that the country continue its efforts to make growth more inclusive and reduce regional disparities; observed that while growth will accelerate gradually over the medium, that this would only happen if reforms continued; and that lowering the public-to-GDP debt ratio would be enhanced by “securing priority investment and social spending in the medium term.”

In releasing the report, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair of the IMF said, “Morocco’s sound macroeconomic policies and reform implementation have helped improve the resilience of the economy. External imbalances narrowed in 2017 and international reserves remain at a comfortable level. Fiscal developments were also positive, with the budget deficit declining due to strong revenue performance and contained spending. Growth rebounded in 2017 and is expected to accelerate gradually over the medium term, contingent on improved external conditions and steadfast reform implementation. However, the outlook remains subject to downside risks. In this context, Morocco’s Precautionary and Liquidity Line (PLL) arrangement with the Fund has been a useful insurance against external risks and has been supporting the authorities’ economic policies.”

Looking ahead, he noted that “Morocco would benefit from a comprehensive approach to tax reforms, sound public financial management at the local level as part of fiscal decentralization, comprehensive civil service reform, strengthened state-owned enterprise (SOE) oversight, and better targeting of social spending.”

“Finally, raising potential growth and making it more inclusive, by reducing persistently high unemployment levels, especially among the youth, increasing female labor participation, and reducing regional disparities will require further measures to advance education, governance, and labor market reforms, as well as to improve the business environment and support more private sector-led growth.”

These comprehensive systemic challenges are an agenda that Morocco continues to engage in implementing current legislation and proposing reforms that signify its determination to achieve more inclusive and sustainable growth.’

Air traffic up year on year as tourism and transshipments increased 11.63%. Morocco World News carried the latest results on Moroccan air traffic released by the National Office of Airports (ONDA).

“2017 set a new record for the Kingdom’s airports, which welcomed 20,357,866 passengers, a sharp rise of around 11.63 percent,” said the ONDA, noting that this double-digit rise “has not been reached since the year 2010.” Passenger traffic increased 8.6% in Casablanca to 9.36 million, up 26.11% in Tangier, 24.93% in Fez, and 11.96% in Marrakesh. “Domestic traffic also recorded a gain of 11.23 percent, with 2,133,287 million passengers in 2017, exceeding the average 2 million.”

“There was a steady rise in the number of tourists coming to Morocco from Europe, but the most notable and encouraging increase in tourist numbers came from what can be described as new and emerging markets for Morocco. The number of tourists from China last year saw a staggering increase of 173 percent. Tourists from Brazil increased by 57 percent, and tourism rates from the United States, South Korea, and Japan all increased by 30 percent.”

Moody’s Investors Service includes Morocco in its positive 2018 outlook. Along with Egypt, the Kingdom is expected to be one of the top performers in the region. “The improved global growth dynamics, ongoing structural reforms, and gradual re-opening of trade routes in former conflict areas, together with a planned reconstruction drive, will underpin GDP growth in 2018,” said Elisa Parisi-Capone, a senior analyst at Moody’s, who pointed to Morocco’s liberalizing monetary policy such as the flexible exchange rate.

“Morocco’s economic growth is likely to ease slightly this year to 3.5 per cent from 3.9 per cent in 2017 due to lower contribution from agriculture, before recovering in 2019,” the study noted.

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