After a resurgence of the COVID-19 pandemic during the summer and fall of 2020, the number of new infections started to decline in December. On January 28, 2021, Morocco launched a nationwide vaccination campaign, which will be rolled out progressively in tranches. In accordance with King Mohammed VI’s instructions, the vaccination drive will aim to inoculate, for free, all Moroccan citizens and residents aged 17 and above—some 25 million people in total. The time span will rely on the pace of vaccine delivery by Morocco’s suppliers, Oxford’s AstraZeneca and China’s Sinopharm.
On the economic front, the government has started to rollout the economic recovery roadmap the King announced in July 2020. Beside reform of State-Owned Enterprises, the government has approved a law that sets technical and institutional frameworks in place for expanding social welfare to segments of the population vulnerable to falling into poverty. This includes universal access to public health services. The Mohammed VI Investment Fund, to support major investment projects as public-private partnerships and contribute to capitalizing Moroccan Small- and Medium-size Enterprises (SMEs), will also soon take form, as an official decree for it has also been approved. A development vision for the Kingdom—outlined by a commission established in December 2019—is expected to guide political debate around reforms that are due to take place in the run-up to the country’s general elections, tentatively scheduled for September 2021.
On the economic front, the shock of COVID-19 has pushed the Moroccan economy into its first recession since 1995. Economic output contracted by 15.1% in the second quarter of 2020, primarily as a result of the lockdown but also of a sharp reduction in exports caused by the pandemic’s disruption to global value chains and the collapse of receipts from tourism. The shock to supply and demand, triggered by the pandemic, has been compounded by the fall in agricultural production due to a severe drought. Although activity picked up in the third and fourth quarters of 2020, the government’s preliminary estimates indicate that Morocco’s real GDP contracted by 7% in 2020, leading to an increase in unemployment from 9.2% to 11.9%.
During the pandemic, the Moroccan authorities have adopted a number of measures to mitigate the impact of these shocks on households and companies by issuing direct transfers to formal and informal workers and partial guarantees to banks for loans granted to firms, as well as reducing the Central Bank’s benchmark interest rate by 75 basis points to a historically low 1.5% and making direct injections of liquidity into the financial system.
In addition, the government has initiated an ambitious reform process, which could increase potential growth in the medium- and the long-term.
COVID-19 has nonetheless had a significant impact on public finances; the budget deficit reached 7.8% of GDP in 2020. As a combined result of this deficit and of the recession, the debt-to-GDP ratio increased from 64.9% to 77.8% of GDP in 2020. On the external front, the current account has proved more resilient than originally anticipated, with a deficit of 3% of GDP in 2020 against 4.1% of GDP a year before. The Moroccan economy has so far maintained good access to external financing, with large multilateral disbursements, two successful sovereign bond issuances in international markets (€1 billion in September 2020 and US$3 billion in December), and relatively stable net FDI flows. The stock of foreign exchange reserves has increased by 26.6% in 2020, reaching almost 30% of GDP, or the equivalent of more than seven months of imports.
After the sharp contraction registered in 2020, GDP growth is expected to accelerate to 4% in 2021. In this baseline scenario, agricultural output returns to meet historical trends thanks to more benign weather conditions, the vaccine rollout proceeds according to the government´s plans, monetary policy remains accommodative, and the fiscal stimulus is maintained. However, the recovery of the manufacturing and services sectors is expected to be gradual, constrained by economic slowdown in Morocco’s trading partners and the protracted recovery of tourism revenue. Real GDP growth is expected to remain slightly above its pre-pandemic trend in the years to come, as the Moroccan economy gradually closes its output gap and structural reforms initiated by the authorities begin to have an impact. The current account deficit is expected to stabilize below 4% of GDP as exports and imports gain traction, while the budget deficit is expected to fall only gradually as the authorities postpone fiscal consolidation until the economic recovery is well entrenched.
Last Updated: Mar 25, 2021