Morocco engaged in a program of wide-ranging reforms with the adoption of a new Constitution in 2011, which set the basis for a more open and democratic society, a more modern state of law and institutions, greater separation of powers, and increased decentralization. The current coalition government is led by moderate Islamist party, PJD (Party for Justice and Development) and composed of 4 parties. In 2013, differing views among coalition members over economic reforms led to the withdrawal of the Istiqlal party (conservative historical party) and the introduction of the RNI (Rassemblement National des Indépendants) a center liberal party. The government is continuing to roll out the last pending constitutional reforms and pursuing the implementation of promised subsidy, pension and capital market reforms.
On local governance and as the country is engaging in a promising regionalization agenda, the country held regional and local elections in September 2015 that defined a new local political map where two major political players emerged: ruling PJD and opposition party PAM (Party for Authenticity and Modernity – close to the Palace). While the latter dominated the leadership of the country’s regions (5 out of 12), PJD is the clear winner in the management of Morocco’s largest cities. This new share of political powers will redefine the government coalition that will emerge from the 2016 legislative elections.
On the economic front, and after a strong economic performance in 2015, the Moroccan economy is sharply decelerating in 2016; illustrating the typical production swing of an economy still dependent on rain-fed agriculture. Thanks to an exceptional 2014/2015 agricultural season, economic growth rebounded to 4.4 % in 2015. However, with the current drought, the 2015/2016 cereal production will be much below average and will drag down total GDP growth below 2 % in 2016.
In response to deteriorating fiscal trends, Morocco has embarked on a major fiscal consolidation effort since 2013. The government initiated in 2013 the reform of the subsidy system and began to rein in other recurrent and investment expenditures, while consolidating tax revenues. As a result, the fiscal deficit decreased from 7.2 % of GDP in 2012 to 4.3 % of GDP in 2015.
Improvements on the external front have been even more spectacular. The current account deficit, which culminated to 10 % of GDP in 2012, was reduced to 2.3 % of GDP in 2015. This reflected the combination of lower imports, as a result of the sharp fall in international oil prices, and higher exports from the “new” industries (automobile, aeronautics, and electronics) as well as from the agro-industrial sector.
Notwithstanding the ups and downs of the agriculture sector, Morocco’s economic growth has slowed down in recent years. On average, real GDP grew by 3.8 % during 2013-2015 underperforming its trend of 4.6 % per annum during 2003-2012. While domestic demand had been the main driver of growth before 2012, its contribution started to weaken in 2013.
Morocco has scaled up its structural reform agenda, but implementation of this agenda remains key to show transformational results. The 2016 Budget Law confirmed the Government's resolution to solidify the tax base, rein in expenditures and implement a pension reform that would lengthen the system sustainability and reduce its contingent liabilities. Along with the ongoing subsidy, fiscal and financial reforms, all these actions are contributing to consolidating the macroeconomic framework, improving the business environment, and enhancing higher and inclusive growth potential.
Last Updated: Mar 31, 2016