In its annual report on Morocco, Moody's Investors Service says the country's Ba1 foreign-currency and local-currency ratings and stable outlooks reflect fiscal rigidities within government finance, and the economy's reliance on agriculture for a substantial part of the kingdom's GDP.
"The ratio of debt to GDP has declined from 79.2% in 1979 to 66.4% in 2004," said Moody's Vice President Sara Bertin-Levecq, author of the report. "Over the medium term, we expect the ratio to drop further." The ratio of general government debt to government revenue also dropped over the same period. Nevertheless, she pointed out that Morocco's ratios are above those of other countries within the Ba1 range.
Morocco's additional credit strengths include a young population, an ongoing process of democratization, and an active government debt management strategy as well as an expansion of non-agricultural GDP with increases in manufacturing and services, says the Moody's report.
"For 2005, agricultural output should be affected by limited rains, and thus will be a test year to determine if the development of manufacturing and services are sufficient to compensate for the drop in agricultural output," said Ms. Bertin-Levecq.
She said the government has instituted a series of legal framework reforms that are likely to have long-lasting effect on the Moroccan economy and also influence the business culture in a positive way. "Over the medium term, if the wave of reforms remains unabated, we would likely see non-agricultural GDP growth pick up along with the economy being less subject to variations in agriculture output," said Ms. Bertin-Levecq.
The rating agency's report, "Morocco: 2005 Credit Analysis," is a yearly update to the markets and is not a rating action.