The Deputy Managing Director of the International Monetary Fund (IMF), Antoinette Sayeh, affirmed that Morocco is showing “resilience” in the face of a large number of shocks recorded in recent years and is convinced that the kingdom will achieve its objectives after having ” held up remarkably well.
In an interview with MoroccoLatestNews, the Deputy Director of the Fund explained that Morocco suffers from structural problems which must be solved by deep reforms capable of putting growth on a more dynamic and inclusive path, in particular by tackling the informal sector. encouraging part-time work.
She considered in this sense that the New Development Model included a certain number of good measures which make it possible to achieve this objective and that the IMF provided Morocco with macroeconomic advice to support the Moroccan authorities.
MoroccoLatestNews: How does the International Monetary Fund see the current economic situation in the world?
The current economic situation is very difficult, there are significant risks for the economic recovery following the coronavirus pandemic and the current geopolitical tensions are aggravating the situation. These risks, combined with more protectionist pressures, lead to restrictions on international trade that significantly affect the global economy. We will likely see impacts on the international monetary system due to the sanctions following the war in Ukraine.
The war in Ukraine could contribute to a permanent division of the world economy into geopolitical blocs based on technological standards, reserve currencies and international payment systems.
International integration was threatened even before the war in Ukraine. Trade and technology tensions, particularly between the United States and China, have hampered trade, investment, and productivity.
In the long term, the current war threatens to undermine the rules-based frameworks that have governed international relations for 70 years due to the worsening situation and economic dispersion resulting from the severing of trade relations by many countries. with Russia.
If the war in Ukraine lasts for a long time, the situation will deteriorate further, and this will have a greater impact on poor countries which need more investment to fight poverty. In this regard, we at the International Monetary Fund seek to focus on the needs of countries most affected by shocks in providing financial assistance and advice, and we believe this is an opportunity for the world to continue to help international financial institutions play their role as a much-needed safety net by providing emergency liquidity and preventing the crisis from spreading.
How long can uncertainty persist and therefore affect the economic outlook?
It depends on the duration of the war, there is a lot of uncertainty in Ukraine and in the world. This affects the global economy and leads to high inflation due to the war and consequent restrictions on the export of raw materials, mainly wheat, thus threatening food security in a number of countries.
If a quick solution to the war is not found, there will be enormous costs both in terms of reconstruction in Ukraine and humanitarian aid to refugees and the implications for the global economy. But there is an opportunity to contain all this destruction by ending the war quickly.
Growth forecasts have become more subject to update, as expectations were to reach growth in the range of 4.4% and 3.8% for the years 2022 and 2023. But we had to lower it to 3 .6% for the two years combined, and this is the second time the Fund has lowered its growth forecast for 2022.
How does the IMF perceive the Maghreb region in terms of growth?
The outlook for North African countries is affected by a number of headwinds; Like the fallout from the war in Ukraine and the sanctions against Russia, not to mention growing inflationary pressures. Consequently, the recovery in the region is expected to slow down, as oil-importing countries lack the necessary buffers to weather negative shocks. Excluding Libya and Egypt, GDP growth is expected to decline from 4.1% in 2021 to 1.8% in 2022.
Inflation is expected to remain high at 8.8% in 2022 (excluding Sudan) due to rising food and energy prices. Oil-importing countries are expected to experience deterioration in their external balances and budgets due to support spending and the cost of debt. On the other hand, the future prospects of oil-exporting countries such as Algeria and Libya have improved considerably, as their budgets are expected to recover.
Most countries in the region are likely to face food insecurity issues due to their dependence on wheat imports from Russia and Ukraine. In addition, the drought is expected to further aggravate the situation.
Regarding inflation, there is an opinion that says it will last a long time, what are your expectations?
We expect inflation to last, unfortunately, longer than expected. Therefore, the challenge for central banks is to work to contain inflation through actions that can be taken at the level of the key interest rate and other aspects of monetary policy.
The prices of a number of raw materials have risen considerably since the coronavirus pandemic. But the risks matter more than the level of energy prices, since the processes of producing and transporting raw materials require a lot of energy, not to mention the disruption of supply chains. As for wheat and corn, it depends on our ability to avoid any disruption of exports from Russia and Ukraine.
The Fund expects economic growth in Morocco to be around 1.1%. What factors influence this forecast?
Morocco is facing many shocks, such as drought, the repercussions of the pandemic, the effects of the war in Ukraine and the consequent increase in import prices. Consequently, we had to revise expectations from 3.1% last January to 1.1% growth expected in the current year.
The Moroccan authorities are doing everything they can to contain inflationary pressures and ensure the recovery which was only in its infancy. The authorities have put in place policies to support macroeconomic stability, and we are confident that this will continue and achieve the objective.
Morocco faces rising food and energy prices, and the result is inflation that reduces incomes and reduces consumption, in addition to a drop in external demand for Morocco, particularly from part of the European Union, not to mention the tightening of financial conditions on international markets.
What are the strengths and weaknesses of the Moroccan economy from the IMF’s point of view?
Morocco has shown real resilience in the face of a number of major shocks in recent years (dry seasons, the coronavirus crisis and now the fallout from the war in Ukraine). This flexibility was mainly manifested through a special vaccination campaign, social support and monetary policy support measures. All this has allowed the Moroccan economy to go through a very difficult stage.
While Morocco has withstood these shocks remarkably well, its economy suffers from structural problems that must be resolved through far-reaching reforms capable of putting growth back on a more dynamic and inclusive path. This is what Morocco is working on by setting up a new development model, by undertaking reforms that concern public institutions, the expansion of social protection, the education and health sectors. Therefore, we see that the way forward is very clear to achieve all the goals.
What are the solutions proposed by the IMF to reduce the phenomenon of the informal sector in Morocco?
We recently published a study on the informal sector in North Africa, the conclusions of which indicated that the level of the informal sector in each country is linked to its level of development. There are other aspects that explain this level, and although they differ from country to country, there is a common factor between them, which is the quality of the governance system, not to mention a a number of legal obstacles which manifest themselves, for example, in the imposition by the Labor Code of restrictions on part-time work.
We have noticed that many women workers in the informal sector prefer this option because the possibility of part-time work allows them to reconcile an income and at the same time to ensure family obligations at home.
The transparency of public and tax policies and their implementation is extremely important in this respect, beyond the procedures necessary for the creation of businesses and taxation that does not take into account the weight of the business. Therefore, Morocco must address these issues. The country has the potential to reduce the level of the informal sector from around 30% to around 20% by 2035.
Morocco is still waiting to move to an expanded exchange rate system for its national currency, the dirham, do you think the time is right?
We believe that many benefits can arise from adopting greater flexibility in the dirham exchange rate, because it will help absorb external shocks like the ones we face today. So we see that there are good reasons to pursue the expansion of exchange rate liberalisation, which is what we are working on alongside the Moroccan authorities.
The IMF’s relationship with Morocco is still linked by some to diktats, what is the nature of this relationship?
We have built a very good partnership with Morocco, advising it with the aim of maintaining macroeconomic balances and strengthening the foundations for stronger and more inclusive growth, and Morocco has done what we believe is right in this regard. .
This relationship has also been strengthened by what the Fund has learned from Morocco, and the Kingdom has also benefited from precautionary tools. This facilitated its access to markets and enabled it to implement a number of reforms aimed at achieving its development.
Morocco has been very clear about the direction it wants to take, especially with the new development model. Our role is to continue to provide advice, and we are able to do so, thanks to our experience in other countries of the world.