The state of play according to the IMF and BNP Paribas

According to the BNP Paribas business report (June 2021) which refers to sources from the International Monetary Fund (IMF), Morocco is one of the countries in the Middle East North Africa (MENA) region which has the more suffered from the consequences of the pandemic, but confidence is in order despite the difficulties.

The recession reached 6.3% of GDP in 2020, a historic drop due to the repercussions of the pandemic on the Moroccan economy. To make matters worse, the S&P and Fitch agencies have relegated the country to the “speculative” category, despite macroeconomic stability which, however, does not raise any major concerns for the time being. The document also mentions the narrowness of budgetary margins which could in the long term become problematic, causing it to be written that an intensification of the reform program appears all the more essential in this regard.

The components of private demand all contracted in 2020, in particular household consumption (-4.1%) and investment (-9%). This is conceivable with a low per capita income (2 932 euros) but which, however, is compensated thanks to significant remittances, which today constitute around 7% of the national GDP and contribute to the growth, development and stability of the country. It is estimated that the Moroccan diaspora represents between 12 and 15% of the total population of the country. In addition, and despite the good performance of final consumption by general government, the fall in domestic demand thus cut growth by 6.5 points while the 12.2% drop in imports of goods and services dampened that of exports (14.3%). In the end, the contribution of foreign trade to growth was slightly positive (0.2 point). What more can we say about the tourist activity after the collapse that occurred in 2020, and for which the current financial year does not bode well, especially since the fall in European demand (around 70% of exports) is most evident.

According to the High Commission for Planning (HCP), the economy returned to growth in Q1 (+ 0.7% yoy) thanks to a very strong contribution from the agricultural sector (+ 13%) which employs 32, 5% of the population and a primary sector which represents 13.7% (2021) of its GDP. A sector which counts year after year for 10-12% of the GDP, its dynamics therefore strongly influence the evolution of overall growth. On the other hand, non-agricultural value added would have continued to contract in Q1 by 1% year-on-year, underlining the fragility of the rebound to come. Also, it is said, that the first signs of recovery remain fragile despite advances in vaccination in Morocco (more than 50% of the population) and in Europe, the EU remaining by far its main economic partner. It should be remembered that Morocco’s main trading partner is the EU. It represents 53% of its imports and 66.7% of its exports. Within the EU, Spain occupies the first place, since it is the destination of 24.61% of exports and supplies 15.6% of imports, and France, which receives 21.6% of exports and is responsible for 12.2% of Moroccan imports.

If overall the finding, a priori, seems severe, it nevertheless suggests a little bit of optimism. In this context, the ambitious recovery support program (11% of GDP) is widely put forward. Composed largely of loans guaranteed by the State (60% of the budget), it also includes, BNP Paribas tells us, the establishment of a strategic investment fund (4% of GDP) with the double objective the launch of major projects, mainly in the form of public-private partnerships, and the recapitalization of companies. Despite an exceptional agricultural campaign in Morocco, the economy should not return to its pre-pandemic level before 2022, we are still told. Beyond the short-term risks, the crisis has also highlighted structural weaknesses that will have to be corrected. If the announcement of several reforms goes in the right direction, their implementation is all the more important as the State will have to consolidate its public finances.

In the short term, however, fiscal and monetary leeway remain comfortable. And if the year 2020 has been trying because struggling with a severe recession, seen differently and after the impact of the pandemic on the economy, the indicators are favorable. They point to a promising economic recovery for Morocco. Since 2015, according to the IMF, Morocco has continued to experience powerful economic growth which reached a GDP of 16.932 billion euros in 2019, an increase of 2.5% compared to the previous year. . This development was unfortunately interrupted by the pandemic, since it fell by 7% in 2020. Estimates for 2021 are optimistic and remain very favorable, since a rebound of 4.5% is expected. The outlook is therefore encouraging and particularly relevant.

The trade balance deficit was reduced by 11.2% in Q1 2021. A reduction explained by an increase in exports of MAD 8.72 billion, against an increase of MAD 3.09 billion in imports (cars and other vehicles designed mainly for the transport of people (3.91 million), electric wires and cables (3.75 million) and phosphates (2.71 million) the contribution to the GDP of the mining industry as a whole would be about 6%.



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