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publication October 11, 2017

Morocco’s Economic Outlook - October 2017

After a poor performance in 2016, a strong rebound in agriculture output is expected to push economic growth up in 2017. Meanwhile, non-agricultural activity and inflation remain subdued. Although the fiscal deficit has declined slightly to 4 percent, the external current account deficit widened. The new government is committed to pursue fiscal adjustment and key program objectives. Yet, much remains to be done to reduce structural unemployment, increase labor force participation, and secure higher and more inclusive growth.

Recent Developments

After a severe drought in 2016, the Moroccan economy, which still has a sizable agriculture cycle, is expected to rebound in 2017. Driven by a better-than-average cereal harvest, economic growth picked up at 4.3 percent in the first semester of 2017 (compared to 1.6 percent during the same period in 2016). The growth of non-agricultural activity remained less pronounced however, at 3.3 percent. Services, and to a lesser extent extractives, were the main drivers of non-agricultural growth. The unemployment rate rose to 9.3 percent in the second quarter of 2017, especially prevalent among the young (23.5 percent) and educated (17 percent). Average inflation in the first half of 2017 remained low at 0.3 percent, reflecting the decline in food prices.

Prudent fiscal policy helped to further reduce the fiscal deficit in 2017, stabilizing the public debt at around 65 percent of GDP. On the external front, the trade deficit deteriorated in the first half of 2017. The 6.6 percent increase in exports, as a result of the recovery in phosphates and derivatives, could not offset the 7.3 percent rise in imports. The bulk of imports consisted of energy products due to higher energy prices while food and capital goods imports slowed down. Thus, the trade deficit reached almost 20 percent of GDP. Tourism and remittance flows remained steady.