A study published by Bank Al Maghrib predicts a return of the Moroccan economy to the pre-COVID level but not for several years. Supported by the IMF, BAM research has drawn up a pre-assessment of the impact of the COVID-19 pandemic and the results of the policy measures adopted in the kingdom.
“The ambitious fiscal consolidation scenario naturally did not anticipate the pandemic. The planned tax reforms were thus temporarily put on hold and attention shifted to policies to mitigate the impact of COVID-19 ”, highlights a study, the result of a joint collaboration between BAM researchers ( Aya Achour and Omar Chafik) and those of the International Monetary Fund (IMF) (Aleš Bulíř and Adam Remo).
“Our simulations, based on assumptions (actions of the Moroccan authorities during the first half of 2020 with certain conjectures in the short and medium term both abroad and in the country), suggest that even with a well-coordinated budgetary and monetary combination , the return to the pre-COVID real GDP level will take several years. Also, the public debt will experience a lasting increase linked to the pandemic “, explain the authors of the document, stressing:” In addition to the obvious assumptions of external demand, we also issue a judgment on the disruptions of supply in the medium term due to the pandemic. And this is at the level of tourist travel restrictions extending until 2021, or even 2022, or at the level of the sustained drop in demand for Moroccan exports ”.
Clearly, slowing productivity growth and disruptions in supply chains will reduce potential GDP growth for some time.
From the start, to fight COVID-19, the Moroccan authorities imposed confinement, the severity of which was more than beneficial to limit the spread. But the medal has its flip side since there was a negative impact with strong consequences on economic activity, we learn in the report which focuses on four parts of the post COVID-19 scenario, namely domestic demand. and supply factors; factors of external supply and demand; developments in commodity markets; and budgetary factors.
Successful containment but with serious consequences
Regarding the first axis, the study notes that the strictly applied lock-down had the double effect of supply and demand from other countries.
“At the time of study development, total non-farm factor productivity was estimated to be down by around 5% and labor participation rate by around 4% based on surveys of of companies (HCP). With regard to demand, households and businesses have reacted to the increased general uncertainty by reducing consumption (by around 3%) and investment (by around 10%) ”, detail the experts who also specify that: “During confinement, according to the national survey of July 2020, 84% of Moroccan companies have interrupted their activities. Hotels, restaurants and textile industries were shut down completely and nearly 50% of all respondents said it would take them another year or more to reach pre-pandemic production levels ”.
And to recall, according to macroeconomic data in mid-2020 published by HCP, that the non-agricultural GDP of 2020 was to fall by 5.25%, year after year; the unemployment rate was to rise to 12.25%; and the average hours worked per week were to drop from 45 to 22 hours.
Regarding the second axis, ie external factors, the study notes that the slowdown in trading partner countries has interrupted the supply channels of manufacturers in Morocco, in particular in the automotive sector. “The lack of international travel has hit tourism hard and for 2020 revenues are expected to drop by 60-70%. Recessions in the host countries of Moroccan workers and as a result, compared to remittances, they should be down by 25% ”, we add before specifying for exports that the international price of phosphates has decreased by about 15% in 2020 and for imports than in 2020, oil prices were about 33% lower and food prices about 7% lower.
Import request contracted
“The evolution of budget balances reflects four major developments, namely economic activity has slowed down, as has revenue collection, in particular non-tax revenue and consumption taxes; healthcare spending has increased, mainly for COVID prevention, testing and treatment; cash transfers during lockdown to vulnerable households jumped nearly 1.5% of GDP; and the government has cut most non-emergency spending, ”analysts said, estimating that overall the fiscal boost has only partially offset the private demand deficit – at the cost of the debt-to-GDP ratio projected at around 75 % in 2020.
“The Moroccan government has chosen to mitigate the economic and social impact of the COVID crisis mainly through cash transfers and guarantees. As for the fiscal policy position for 2021, we therefore assume a globally neutral fiscal stance that would stabilize the public debt at around 75% of GDP, with transfers being the residual element of our simulation ”, they point out.
Still according to the same source, the impact of the pandemic on Morocco depends essentially on the hypotheses on its duration in industrialized countries because the demand for imports from the EU and the United States should remain contracted and the price of fuel. phosphate is not expected to recover until 2025. As a result, the impact on the Moroccan market is likely to last for a long time. And to conclude that given the magnitude of the shock, the growth rate would not be sufficient for GDP to return to its pre-COVID-19 level than by 2030.