Jean R. AbiNader
July 20, 2020
Many countries are facing declining growth rates due to the pandemic and Morocco is no exception. Given lockdowns and flight restrictions implemented worldwide early on, tourism and hospitality, usually the third largest component of GDP, have suffered enormous losses and the sector almost collapsed during the first 90 days of the global response to C-19. In the latest World Bank report, “Morocco Economic Monitor,” the Bank projected the Moroccan economy to contract in the next year, the first recession since 1995 due to C-19. It noted that, “Over the past two decades, Morocco has achieved significant social and economic progress due to the large public investments, structural reforms, along with measures to ensure macroeconomic stability.”
Indeed, the World Bank’s forecasts indicated that Morocco real GDP is projected to contract by 4% in 2020, which is a sharp swing from the 3.6% positive growth expected before the pandemic. Consequently, the World Bank expects Morocco’s fiscal deficit to widen to 7.5% of GDP in 2020, around 4 percent larger than expected before the Covid-19 crisis. Meanwhile, the country’s public and external debt is to rise but still remain manageable. In assessing the government’s well regarded response to the crisis, the World Bank puts emphasis on moving from mitigation to adaptation, which is “Key to ensuring a resilient, inclusive, and growing Moroccan economy.” It also pointed out that despite this year’s setbacks, the country can still “Build a more sustainable and resilient economy by developing a strategy to adapt,” similar to what it has done to address issues of climate change and environmental challenges.
When viewed in comparison to the rest of North Africa and the Middle East, let alone its sub-Saharan neighbors, Morocco is in a strong position to adapt to global changes as companies rethink supply chains and vulnerabilities in logistics. Globally, and especially in Europe and the US, corporations are rethinking their reliance on China as a key supplier and Morocco is poised to benefit, as I mentioned in a previous blog. The EU is already calling for “strategic autonomy” in sectors such as pharmaceutical by relying on more reliable and diversified supply chains. The new strategy is expected to entail tighter rules on human rights and environmental protection on imported goods, a move that experts say would boost local manufacturers, and Morocco is near the top of the list.
Guillaume Van Der Loo of the Brussels-based think tank Center for European Policy Studies was quoted recently as saying, “If you look at Morocco, there are more favorable conditions there for specific areas in particular, in relation to renewable energy and environmental related sectors. Morocco is quite a frontrunner and the EU tries to chip in on that. The idea that the European Commission has already expressed about diversifying supply chains could be beneficial for Morocco and that could accelerate negotiations on the new trade agreement.”
Being one the very few countries in the world that have free-trade deals with both the US and Europe, it is hardly surprising that Morocco has been touted by many as a gateway for Western investment on the African continent. “Morocco is very well positioned because of its proximity, because it’s part of EU’s regional trade agreements, its rules of origin are kind of integrated with those of the EU,” says Alessandro Nicita, an economist at UNCTAD.
Yet Morocco faces challenges in grabbing these opportunities including restrictive capital controls and a paucity of high-skilled workers. The country’s education system which was overhauled in the 1980s has failed to raise skill levels among the country’s youth, making them especially unsuitable for middle management roles.
Another concern has been raised by the National Competitive Council in Morocco which said that if the country was to move forward efficiently, it had to end monopolies in key sectors such as fuel distribution, telecoms, banks, insurance companies, and cement producers that created an oligopolistic situation in the country.
Oxford Business Group also released a study focusing on the success that Morocco is achieving in terms of combatting the effects of C-29. “Morocco boasts a robust and diversified industrial base, developed through years of heavy investment, which enabled the country to take actions to control the pandemic and mitigate supply chain disruptions.” The investment friendly climate and robust infrastructure, with Africa’s fastest train, will enhance the country’s attraction for manufacturers looking to relocate Asia-based production, as supply chain disruptions due to distant and vulnerable suppliers have resulted in many companies pursuing a strategy of near-shoring, the report said.
So Morocco’s future in manufacturing, agro-business, and technology may well determine the country’s capacity to recover its positive GDP growth rate as it overcomes the C-19 recession through robust marketing as a country for reliable and relatively inexpensive supply chains and a skilled workforce.