Subject of an interesting focus of the Intesa Sanpaolo Study Centre, Morocco is the third largest economy in the southern Mediterranean after Egypt and Algeria, with a GDP of 95,5 billion dollars in 2012. Thanks to investments in services (tourism), construction (civil homes and second homes), mining and manufacturing and to the reforms that have favored private initiative, the economy has reached a fair degree of diversification. However, the weight of the primary sector remains significant (between 14 and 19% of GDP in the last five years), whose strong dependence on climatic conditions adds volatility to growth dynamics. The main manufacturing industries are chemicals, processing of agricultural products, textiles and mechanical engineering. In this regard, the contribution of manufacturing sector (13%) is expected to increase thanks to the recent inauguration of a Renault car plant in Tangier and the start-up, expected in 2013, of the production of aircraft parts in a new Bombardier factory in Casablanca. Morocco has also developed economic relations with foreign countries, in particular the EU, with which the country signed an association agreement in 2000. According to IMF estimates, almost 90% of remittances from migrant workers come from the EU (which overall amounted to 7,7% of GDP in 2012), over 90% of income from tourism (which together covered a share of 7,0% of GDP in 2012), 80% of the flow of FDI (equal to 3,9% of GDP in 2012), and more than 60% of exports. These close economic relations then imply a high correlation between the economic cycle in Europe and the trend of the Moroccan GDP, whereas a 2% drop in GDP in Europe causes a drop in Morocco's potential output of 0,6% in the 1st year and 1,3% within three years.
And, indeed, it is the exposure of the Moroccan economy to the world economy is high, both through the current account channel of the balance of payments (imports of energy products for 95% of national needs, exports of low-tech products, remittances from migrant workers, income from the tourism sector) and the financial account (FDI, demand for second homes from abroad). The infrastructures, specifically the transport network, energy generation and telecommunications, are still insufficient.
Over the last decade, the Moroccan economy has recorded an average GDP growth rate of 4,4%, comparable to that of other diversified economy countries in the South Mediterranean, which has made it possible to bring down the unemployment rate from 13,4% in 2000 to 8,9% in 2011 (among the youth population between 15 and 24 years of age it is close to 18%). The poverty rate thus passed from 16% in 1999 to 9% in 2008, the latest data available, while the illiteracy rate decreased by 13% while the mortality rate dropped by 30%. The average per capita income ($ 5220) however, it remains among the lowest considering the Mediterranean countries of the South. The country still has large areas of underdevelopment in the countryside and in the suburbs of large cities, fueling hotbeds of social tensions.
Morocco's economy recorded a growth rate of 2,7% in 2012, compared to 5% in 2011. This slowdown was mainly driven by the fall in agricultural production (-8.9% from +5,6% in 2011) caused by the bad harvest of cereals, while activity in the non-agricultural part of the economy showed substantial resistance (+4,5% in 2012 compared to +4,9 % in 2011), thanks to the creation of some public utility services. What if household consumption showed a trend equal to less than half of that of the previous year (+3,6% in 2012 from +7,4% in 2011), public consumption accelerated from +4,6% in 2011 to +7,9% in 2012. During the first quarter of this year the GDP growth accelerated to 4,8%, compared to 2,7% in the same period of 2012, mainly due to the recovery of agricultural production (+16,4%). However, the non-agricultural sector slowed down (+3,3% against +4,4% from January to March 2012) mainly due to the decrease in manufacturing production (-1,5%), penalized by weak foreign demand. The expected good agricultural campaign for cereals, after last year's bad harvests, together with the expected recovery of industrial production, thanks to the aforementioned new plants and food processing activities, are expected to lead to a substantial acceleration of the trend rate of GDP expansion during the second quarter of 2013 (+5,8%). On the other hand, the difficulties continue in the construction (-6,5%) and real estate (-2,6%) sectors. The services, especially those related to tourism and sales, are expected resent the weak economic situation in Europe, where most of the tourists and remittances that support sales come from. Overall, GDP is expected to grow by 3,5% in 2013. In 2014, the improvement of the external conditions, the reaching full capacity of the new automobile and aircraft components plants and the expansion of the port of Tangier, an important trade hub between Africa and Europe, are expected to determine a further acceleration of the GDP expansion rate (+4,5%).
THErising fuel and oil prices for domestic use (which remain below market prices), in June 2012 led to an upward shift in the inflation trend rate, which rose to 1,9% in June 2012, from 0,9% in December 2011. However, the acceleration was less than expected, held back by the absence of pressure from the demand side and by contained increases in the prices of foodstuffs. A further boost to prices came in the final months of 2012 and at the beginning of 2013 from food products, with the partial reduction of subsidies on flour. Looking ahead, the conditions do not seem to exist for a further substantial cut in subsidies, while the expected good agricultural season will help contain the prices of basic necessities. On average for the year for 2013 the inflation rate is expected at 2,2%
In recent years, however, Morocco has seen a continuous worsening of the position with foreign countries, with the current account balance going into deficit starting in 2007 and foreign exchange reserves decreasing by 40% in the last five years. The current account deficit it expanded further in 2012, reaching 9,6 billion (9,8% of GDP), due to the increase in the prices of imported energy products and the negative impact on exports, tourism and remittances of the European economy. The surplus of the financial part rose to 6,2 billion in 2012, from 5,5 billion in 2011 thanks to the recovery of IDEs and, above all, the issuance of a USD 1,5 billion sovereign loan last December. This loan was then reopened at the end of May 2013, with the collection of another 750 million. There Balance of payments recorded a total deficit of 2012 billion in 3,6, higher than the 2,5 billion in 2011. At the end of 2012, foreign currency reserves had fallen to 15,8 billion, from 18,8 billion at the end of 2011. last August Morocco obtained from the IMF a precautionary credit line (PLL) which in two years will reach the amount of 6,2 billion. This funding is given to countries which, despite having good fundamentals, are facing a temporary deterioration of public finances and/or the balance of payments due to external shocks. Unlike the flexible credit line (FLC) granted during the 2008-09 crisis to Mexico and Poland, the PPL contains requests for adjustment of elements of vulnerability that the country's economy presents (in the case of Morocco, current and budget deficit). The net external position showed a deficit of more than 50% of GDP in 2011, which rose to 60% in 2012 according to IMF assessments. The external debt to GDP ratio, equal to 33,8%, is estimated to be lower than the average value for emerging countries.
Morocco is with Israel the only southern Mediterranean country whose sovereign debt in foreign currency is considered investment-grade (BBB- for S&P and Fitch; Ba1, just below investment grade, for Moody's) by major rating agencies. However, both S&P and Moody's have introduced a negative outlook underlining the worsening of public finances and the external position, determined both by a less favorable international situation and by domestic political developments. From this point of view, the local government managed to control the protest, giving both political and economic answers. The latter, in particular the increase in public spending on wages and subsidies, however, have led to a deterioration of public finances. Despite this, the albeit contained protests have once again highlighted how much the main elements of vulnerability are to be found in the condition of poverty in which a considerable portion of the population is found, with an economic growth rate insufficient to absorb unemployment. With a burden on subsidies and public finances, the loss of competitiveness on international markets and, last but not least, the excessive dependence on an agriculture that is still not very mechanized and subject to the variability of climatic conditions.
