Morocco’s Economy Shows Resilience and Growth in Key Sectors: IT, Agri-business, and Telecoms Lead the Way – Jean R. AbiNader
Jean R. AbiNader, MATIC
October 25, 2017
Inflation in check, as the rate in Morocco rose in September to 0.4% year-on-year from 0.3% the previous month. Reuters reported that on a month-on-month basis, the consumer price index rose to 0.8 percent in September, while the annual price index for food and non-alcoholic beverages fell to 0.7%, with non-food prices up 1.3% in September, year-on-year.
Growing e-commerce is part of the better news for Morocco. In September merchants and e-merchants made 4.8 million online payment transactions amounting to some $200 million, using foreign and domestic bank cards. This reflects a growth of 86.1% in total transactions and a 51.4% increase in value. Moroccan cards accounted for 98.2% of the transactions and 92.6% of the value. Despite these large increases, cash continues to dominate business dealings.
Good news on the credit rating front as well. Fitch Ratings announced a BBB- rating with a stable outlook, projecting a 4.6% GDP growth in 2017. Key criteria for the rating are Morocco’s macroeconomic stability, its prudent economic policies, and a well-managed budget deficit. Negative criteria include weak governance and development, relatively high public debt, and high current account deficits. Fitch believes that both agricultural and non-agricultural growth will increase through the end of 2017 and into 2018.
The African Development Bank sees a jump in GDP. Morocco, for the first time, is projected to top $121 billion in 2017. This is an outstanding performance: the economy has almost doubled in value in the last 12 years, from $65.6 billion in 2006 to 121.42 billion in 2017. This makes Morocco the sixth largest economy in Africa, with no hydrocarbons or large population to augment it.
Internet growth plays its part in creating new tools and products to spur progress. According to the AFK Insider, Morocco is second in connectivity in Africa, with one of the fastest broadband systems. This growth has made it easier for Morocco to manage its continued growth in tourism, up 10.4% year-on-year January through August. This translates to 8.4 million tourists, international arrivals up 13.1% with Moroccans living abroad accounting for an 8.1% rise.
It appears that efforts to attract Asian visitors are succeeding — with a 315% increase from China, Japan up 43%, and South Korea up 41%. New flights to Brazil are also paying off with a growth of 52% in the number of visitors. The latest figures show that 60% of all tourists visit Marrakech and Agadir. Tourism now contributes close to $5 billion to the economy.
On the other hand, despite the good news, Minister of Tourism Mohamed Sajib recently took issue with the pace and depth of investment in the sector. Noting all the good news, he pointed to gaps between promised investments and results by the public and private sectors. He called out government bureaucracy and weak investor participation as two major hurdles to be overcome.
The Minister wants to revive two organizations that only exist on paper – the Interministerial Commission for Tourism and the Higher Tourism Council. He further recommends to the government that the 15 regional tourism development programs be reconfigured as only 44 projects out of hundreds proposed have been achieved.
In fact, only one-fourth of the monies allocated to tourism under Vision 2020 have been released, as the government has been reluctant to spend the money without strong private sector partners. The biggest issue by far is that the private sector has not kept pace with promised projects, committing less than 30% of the monies called for in the national plan.
The future of agriculture is up, according to a recent assessment by the US Grains Council (USGC), which featured Morocco as one of the hottest markets in Africa. The USGC works to develop export markets for US producers, and Africa, with its young demographics, is a key target. In Morocco and Tunisia, it has focused on capacity building and expanding livestock production. According to Kurt Shultz, senior director of global strategies, “Fifteen years ago, Morocco was a completely different industry, it was fragmented and small. Now the largest feed mill in Africa is in Morocco – you could not get any poultry slaughter houses in Morocco and now you have one company investing $40 million.”
He sees similar growth patterns in cattle production, and “commentators have been forecasting that the models used in Morocco could offer guidance to countries in other parts of Africa,” according to the USGC.
According to an article in Aujourd’hui, cereal production has been a priority under Plan Maroc Vert due to the high levels of imports that are a heavy drain on the government budget. The Plan has three main objectives related to the sector: reduce area under cultivation to 4.2 million hectares to cap water utilization; reduce imports by 20%; and reach an overall production of 70 million quintals.
The article notes that during the first seven years of the Plan (2008-2015), average production reached 80 million quintals from around 58.4 million quintals. Durum wheat yield improved to reach 17.7 quintals per hectare at the end of 2015, compared to 13 quintals per hectare at the end of 2007. Soft wheat yields increased from 14.3 quintals to 19.2 quintals during that period. Improving grain yields would not have been possible without modernizing the industry with better seeds and fertilizers.
The role of the private sector has also been instrumental in this growth, in terms of both better management and the effectiveness of industry associations. The government has done its part by initiating a wide range of support and incentives including a comprehensive insurance system, grants for equipment, and promoting aggregation of crop planning to reduce costs and increase production.