Positive but fragile prospects
Morocco’s macroeconomic fundamentals remain sound. The balance of payments has been subject to some pressure, but the risk of external instability is low. The current slowdown in import growth should help stabilise the current account deficit, while pressures on forex reserves have abated since the authorities postponed the exchange rate reform. Fiscal prospects are also looking much better after a poor performance in 2016, and the economy is benefiting from better external conditions and the rebound in agricultural output. In the non-agricultural sector, however, growth is still too sluggish.
In recent months, Morocco’s social-political situation has been unusually agitated. In addition to difficulties in forming a new government after the October 2016 legislative elections, a protest movement has broken out in the Rif region. These events do not seem to have tarnished the kingdom’s image, at least not for the international financial markets. Another reason for satisfaction is that Moody’s decided in February to put a positive outlook on Morocco’s sovereign rating, while the political situation was not fully normalized yet. Mr. Al-Othmani, the new prime minister, will therefore manage an economy with solid macroeconomic fundamentals. Main goals of his programme are in line with those of the previous legislature. It is still targeting an increase in the weight of the industrial sector to 23% of GDP by 2020, from 16.5% today. Central government debt is also to be reduced to 60% of GDP. Yet even though short-term prospects have improved, the economy is still a far cry from achieving the vigour necessary to reduce unemployment.
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by Stéphane ALBY