Notes on the Economy – A Roundup of Recent Posts of Interest on Morocco – Jean R. AbiNader
Jean R. AbiNader
August 16, 2019
During his Throne Day speech, King Mohammed VI declared that Morocco needed a new development model. “Fresh blood must be brought into political, economic, and administrative institutions and entities including the government” to draft a new “generation of projects,” he said, urging rapid improvements in social services. The king said he will appoint a committee to review Morocco’s growth plans by the end of summer, according to an account in Bloomberg. The new committee will be scrutinized both for the diversity of its membership and its experience in dealing with all strata of Moroccan society.
That same day, Central Bank Governor Abdellatif Jouahri warned that Morocco’s economy is grappling with rising social demands. Continued public demonstrations protesting both economic and political shortcomings have raised the temperature in the public space in the country. The rising discontent is mirrored in the decline in the country’s economic growth, as the International Monetary Fund this month lowered its forecastfor Moroccan economic growth to 3% in 2019, and cut its inflation estimate to 0.6% from 1.4%.
Overall unemployment stands at 10% but rises to 25% for young people. The Governor called for education reform in line with job market requirements. “Putting Morocco on a track of steady growth requires boosting competitiveness and addressing structural vulnerabilities of Moroccan enterprises while reducing the scale of the informal sector,” which represents 11.5% of Morocco’s GDP. He also mentioned the need to better target state subsidies to needy families rather than general support that is accessed by all Moroccans.
The World Bank issued a report that stresses the need for the government to support Moroccan companies to become more competitive, better penetrate local and global markets, and develop and export their goods, services, and products. This would include facilitating a more favorable business environment that promotes fair competition, skilled human resources, and support for entrepreneurship. It noted that “Morocco has invested heavily since the mid-2000s (34% of GDP), but the benefits in terms of economic growth, job creation, and productivity have been disappointing.”
Despite Morocco’s success in attracting FDI in key manufacturing, energy, production, and industrial sectors, and in making public investment into infrastructure projects such as ports, highways, and distribution networks in support of industrial centers, “it has been less effective at integrating domestic firms into international value chains to boost jobs and exports.” As a result, the report recommends, that there be more support to the private sector to drive growth.
The World Bank’s report reflected similar remarks by Governor Jouahri when he said that the Central Bank was working to boost economic growth and curb unemployment at a time when authorities are working to consolidate public finances and preserve the sustainability of the country’s sovereign debt. “Our country’s economic performances can’t keep up with the growing social demands, despite efforts that were being made. Public policy must prioritize the development of Moroccan entrepreneurship and enhance its international competitiveness,” he said, adding that this entails reforming education and vocational training.
Reflecting on the king’s directive to enhance government efforts to promote growth across all regions of Morocco, PM Othmani announced that $1 billion will be transferred to meeting infrastructure and development needs by 2021. In line with its still evolving commitment to regionalization, the regions’ share of tax revenues will rise from 4 to 5%. This is in line with studies that analyzed each region’s potential in terms of promoting sustainable economic and social development and reducing the disparities and isolation of rural areas.
Consistent with the projects and programs of the National Initiative for Human Development (INDH), the monies will be allocated to the Solidarity Fund in each region that works to ameliorate deficits in human development and needs in basic infrastructure and equipment. This includes roads, railways, ports, airports, logistics, construction, public works, and services. As noted by the king in his Throne Day speech, the government has also established a new approach to monitor regional and local development investments on a regular basis to assess results and efficiency.
Morocco’s overseas investments continue to be a bright spot in the overall economy. They rose 68.1% in the first half of 2019 to $444 million, spurred by Maroc Telcom’s acquisition of TigoChad and Addoha Group’s luxury developments in Côte d’Ivoire. Meanwhile, FDI into Morocco declined in the same period to $872 million which is 19.6% less that the first half of 2018.
During that period, the Moroccan trade deficit grew by 4.9% to around $10.8 billion following a 3.8% increase in imports ($26.4 billion) while exports increased some 3.1% ($15.6 billion). Fewer exports largely reflected weakening in overseas demand for automobiles. Agriculture products and food industries exports rose by 6.7%, aeronautics by 12%, and phosphate-related products increased by 1.1%.