Since its appointment on April 5th, 2017, Morocco’s government coalition led by the Justice and Development Party (PJD) has moved along with rolling out the reforms initiated under the previous government, focusing mainly on social protection programs, job creation and reducing economic disparities across the country.
Over the past few months, the government has been confronted to increased pressure from the population of the Jerada province (Northeastern Morocco), claiming an “alternative economy” to alleviate poverty and exclusion in the region. A proposed government economic plan for the province was developed to tackle the region’s development constraints.
More generally, the government is working on the development of a vision to respond to King Mohammed VI’s call to review the country’s development model. This comes after his decision to dismiss several high-level officials last October further to the publication of the Audit court’s report pointing out shortcomings in the delivery of development programs for the Rif region; a region that also staged a wave of social protests over the course of the past year and a half.
On the economic front, following a sharp slowdown in 2016, real GDP growth rate reached 4 percent in 2017 (from 1.2 percent in 2016), boosted by a strong rebound in agricultural output. Driven by better than average cereal production, the agricultural sector has experienced a strong recovery, with a growth rate of 15.1 percent. However, non-agricultural GDP remained sluggish at around 2.8 percent.
Mining activities contributed the most to growth outside agriculture, mostly driven by the recovery in phosphates. Inflation remained low at 0.7 percent. Unemployment remained on an upward trend, rising from 9.9 in 2016 to 10.2 percent in 2017, especially prevalent among the young and the educated, as well as women (26.5 percent 17.9 percent and 14.7 percent respectively), reflecting the weak capacity of the economy to generate inclusive growth.
The fiscal deficit declined in 2017, while the slight improvement of exports was not enough to reduce the trade deficit as imports increased. Thanks to prudent fiscal policy, the fiscal deficit was reduced to 3.5 percent of GDP in 2017 and the central government debt ratio has been stabilized at around 65.1 percent. Regarding the current account deficit, it is estimated to have declined to 4 percent of GDP in 2017 (compared with 4.4 percent in 2016). The trade deficit widened by 2.8 percent despite the surge in phosphates exports. In fact, exports picked up by 9.4 percent, while imports increased by 6.4 percent (from a larger base), reflecting a sharp rise in oil prices. Tourism receipts and remittances remained steady.
Morocco’s central bank finally adopted the reform towards a more flexible exchange regime, allowing the currency to fluctuate within a wider band of ± 2.5 percent, compared with the previous band of 0.3 percent.
GDP growth is projected to decline to 3 percent in 2018. Cereal production is projected to return to its historical average and non-agricultural GDP growth is expected to remain around 3 percent in the absence of more decisive structural reforms. The fiscal deficit will continue to narrow and should be further reduced to 3.3 percent of GDP in 2018 in line with the government’s commitment to bring down the deficit to 3 percent of GDP by 2019-2021 and to reduce public debt to 60 percent of GDP by 2021.
In line with this fiscal consolidation and oil price projections, the current account deficit is projected to deficit is projected to stabilize around 4.3 percent of GDP on average over 2018-2020, reflecting also sustained export growth, tourism receipts and remittances which will offset energy imports.
Over the medium term, Morocco’s economic outlook should improve provided the government remains committed to implement deep and comprehensive reforms. The outlook remains linked to continued fiscal consolidation, flexibly managed exchange rate regime and to the implementation of structural reforms in key areas such as education and the labor market in order to reduce unemployment, especially among the young, improve the business environment, and enhance human capital for higher and inclusive growth.
Last Updated: Apr 16, 2018