Estudos Econômicos
Morocco

Morocco

Population 33.5 million
GDP 3002 US$
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Synthesis

MAJOR MACRO ECONOMIC INDICATORS

  2014 2015 2016(f) 2017(f)
GDP growth (%) 2.6 4.5 1.5 4.1
Inflation (yearly average) (%) 0.4 1.5 1.3 1.3
Budget balance (% GDP) -4.9 -4.3 -3.5 -3.0
Current account balance (% GDP) -5.6 -1.9 -1.2 -1.4
Public debt (% GDP) 63.4 64.0 64.4 63.7

(e) Estimate   (f) Forecast

STRENGTHS

  • A favourable geographical position, close to the European market
  • Strategy to move upscale and diversify production in automotive, aeronautics, electronics, offshoring, chemicals, pharmaceuticals, textiles/leather and agri-food
  • Macroeconomic stability policy
  • Political stability and commitment to reforms

WEAKNESSES

  • Economy very dependent on performances in the agricultural sector
  • Significant social and regional disparities
  • The poverty rate remains high even though it is falling
  • Weakness in productivity and competitiveness
  • High unemployment rate 

RISK ASSESSMENT

Recovery in growth in 2017 after a clear slowdown in 2016

After an exceptional year in 2015, a lack of rainfall led to a decline in agricultural production in 2016 causing a sharp slowdown in the Moroccan economy. Although non-agricultural GDP growth remained dynamic, it did not make up for the negative contribution from the primary sector to activity. Consumer demand nevertheless remained resilient whereas agricultural sector accounts for 40% of the active population. Investment was the main engine behind activity. Growth is set to pick up clearly during 2017. A good harvest season in 2017 should enable a significant increase in agricultural GDP whereas growth in non-agricultural GDP should continue at a modest pace following on from 2016. The manufacturing sector should benefit from the rise in productive investment in 2016, resulting in an increase in capital goods. The automotive sector should benefit from the slight recovery in Europe as should phosphates, which will post better performances than in 2016 in a less strained global market. Growth in services is expected to be more mixed, with activity in trade services and communications likely to be robust in response to dynamic consumer demand driven by an increase in credit and higher remittance from Moroccan diaspora. Inflation is likely to remain modest enabling the central bank to implement an inflation targeting policy which would go hand in hand with a reform of the exchange rate regime toward a more flexible system in H2 2017.

 

Public deficit in decline and current deficit set to stabilise

The consolidation of public finances following on from the IMF’s aid programme has favoured a rebalancing of the public accounts. The reform of subsidies indeed helped massively reduce current spending, helping to structurally lighten the state budget. In addition, the decline in the public deficit has stemmed from the fall in current spending and an increase in public revenues, especially the rise in customs revenues and domestic taxation. After narrowing in 2016, the public deficit should continue to fall in 2017. The time taken to form a government should not change the implementation of a 2017 finance law. Economic growth combined with better collection of taxes should benefit revenues. Investment spending should continue with a rise in investments under the framework of the green Morocco plan as well as in the renewable energies sectors and education. The ratio of public debt to GDP remains high but should fall in 2017. The consolidation of public finances and better management of debt should indeed lead to a change in the debt trajectory.

In 2017, Morocco should continue to benefit from low oil prices enabling it to maintain a low energy balance albeit slightly higher than in 2016. The slight recovery in Europe should add weight to growth in exports for the automotive and aeronautics sectors. The services balance should be in surplus thanks to the performances expected in the telecoms sector, although it is likely to remain limited by the prospect of a decline in the tourism sector. FDI should maintain its level of growth in 2017.

The banking sector should remain profitable and well capitalised. Doubtful loans are continuing to rise in the textiles, property and maritime transport sectors but they remain well-provisioned for. Credit should continue to stimulate investment moderately in 2017 with a recovery expected in corporate loans.

 

JDP to be continued following legislative elections in 2016

Legislative elections in October 2016 renewed the Justice and Development Party led by former Prime Minister Abdelilah Benkirane as the leading political representation in the assembly. The former prime minister was requested to create a new government on the basis of a new coalition in October 2016.

With the aim of preserving its attractiveness, Morocco will have to continue reforms enabling an improvement and cleaning up of the business environment especially concerning the simplification of administrative procedures associated with the promotion of investment and modernisation of the legal framework. The country has also been particularly active in the African continent and is considering reintegrating the African union. In December 2016, the King of Morocco ended an important diplomatic tour in Africa with the aim of strengthening his presence in the continent. Finally, the country was particularly active on the international front, hosting the COP22 in Marrakech in November 2016. 

 

Last update : January 2017

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