The Morocco Economic Monitor (MEM), a semi-annual report from the World Bank economic team, presents recent economic developments and economic policies. This June 2020 MEM issue includes a chapter on Morocco’s economic outlook in light of the COVID-19 pandemic and the consecutive economic crisis it generated. This issue covers macro-economy to business environment and private sector development as well as prospects for economic rebound.
Over the past two decades Morocco has achieved significant social and economic progress due to large public investments, structural reforms, along with measures to ensure macroeconomic stability. The COVID-19 shock is, however, abruptly pushing the economy into a severe recession, the first one since 1995. The economy is expected to be doubly impacted by domestic and external economic shocks. Real GDP is projected to contract by 4 percent in 2020, a sharp contrast to the 3.6 percent expansion projected for that year prior to the outbreak.
The labor market and the private sector are severely impact by the crisis. The combined negative effects have led to widespread job and income losses, especially in the informal sector where 66 percent of workers lost their jobs. Government assistance has partly mitigated income loss for 19 percent of households, particularly in the informal sector.
Morocco’s twin deficits are projected to deteriorate but remain manageable. Despite lower imports, the current account deficit is expected to widen to 8.4 percent in 2020 reflecting sharp declines in goods export, tourism revenues, and remittances. On the fiscal front, revenue (excluding those from the COVID-19 Fund) are projected to materially contract while expenditures are projected to increase in 2020 on the back of additional spending on health, social protection, and other COVID-19 policy responses. As a result, the overall fiscal deficit is projected to widen to 7.5 percent of GDP in 2020, almost 4 percentage points larger than projected pre-COVID-19. Both public and external debt are projected to rise but to remain sustainable.
The government’s response to date has been swift and decisive. The government’s proactive response enabled the country to avoid a massive outbreak, thus saving lives. The COVID-19 crisis led to the preparation of a Revised Finance Law, the first in 30 years. Continued good policy measures are critical both to shorten and lessen the economic, social, and health trough, and to hasten the recovery; these include a clear roadmap for lifting containment measures as well as an economic recovery plan.