King Hassan died in the summer of 1999 bequeathing to his son, Sidi Mohammed a much more economically healthy kingdom.
The new king is continuing on the road to economic reform, which his father began in the early 1980s with the support of the IMF and World Bank. These reforms, which have included overhauling the banking and tax systems and lessening import restrictions, have led to decreased inflation, increased per capita income and more healthy government financial accounts. The government is persisting with its privatization program and has placed a priority on developing infrastructure.
Morocco has many economic strengths, including the world's largest phosphate reserves, a diverse agricultural sector, a sizable tourist industry, a growing manufacturing sector (especially in the clothing industry), and considerable inflows of funds from Moroccans working abroad. Most of Morocco's trade is with Europe, with France alone accounting for about a quarter of Morocco's imports and a third of its exports.
But the country also has weaknesses. One such weakness is rainfall as the agricultural production comprises more than 16 percent of GDP. Economic output can vary widely from year to year depending on the amount of rainfall. Another serious problem facing the new king is job creation as unemployment nears 20 percent.
Parliament approved a DH 140.9 billion budget for fiscal 1999-2000. The budget forecasts total resources of DH 125.6 billion, a 5.8 percent increase over the year before. The budget deficit is to increase to DH 15.9 billion from 13.8 billion and state spending will increase by 3.4 percent to DH 63.4 billion. GDP is expected to grow by 8.4 percent up from around 0.2 percent in 1999.
The Moroccan government has pursued an economic reform program supported by the International Monetary Fund (IMF) and the World Bank since the early 1980s. It has restrained government spending, revised the tax system, reformed the banking system, followed appropriate monetary policies, eased import restrictions, lowered tariffs and liberalized the foreign exchange regime.
These reforms and changes have paid off. Per capita income, for example, has risen; inflation decreased and stabilized and there is narrower fiscal and current account deficits. Further indication is the increased amount of foreign investment, which rose 424 percent between April 1998 and April 1999 from DH 207.7 million to DH 1.0627 billion.
Still, the IMF is calling on Morocco to do more faster. The organization is urging the authorities to reform the civil service, abolish food subsidies and speed up privatization.
Additionally, the IMF wants Morocco to extend tax coverage to agriculture and to broaden and harmonize value-added taxes and excises. The organization did praise the country's creation of six commercial courts for resolving business conflicts, a development that will increase Morocco's attraction in the eyes of investors.
One of the country's economic Achilles heal is rainfall. Agricultural production constitutes more than 16 percent of GDP, and a large part of the Kingdom's revenues come from agricultural exports. Thus, years with plentiful rainfall will be reflected positively in GDP and years where there is drought will have negative effects. In 1995, for example, drought led to a four percent decrease in GDP, while 1996 rains raised that figure to 11 percent. In 1998, massive floods led to a 2 percent drop in Morocco's output. Excluding agriculture, however, the economy grew by 3.1 percent.
Job creation is another serious problem for this nation where more than 70 percent of the population is under age 25. Despite creating 50,000 new jobs since March 1999, Morocco's unemployment still approaches 20 percent. Further exacerbating the situation is that a large population segment lives below the poverty line. These realities pose serious social and political threats to the regime's stability.
The government has recently begun to use revenue generated from its privatization program to address social problems. In August 1999, the government announced an initiative to funnel revenues from a GSM license into a fund that would be used to combat unemployment and bureaucratic red-tape that is repelling some potential investors. additionally, the fund will concentrate on housing projects in remote areas, upgrading the country's infrastructure and tourism sector.
The government has also placed a priority on developing the country's infrastructure. Large projects are being carried out on the kingdom's telecommunications and transportation infrastructure.
The government is continuing with its privatization program. The parliament recently passed a privatization law intended to accelerate the sale of state-owned enterprises, including approval to sell the government's stakes in more than 100 enterprises. The government hopes such steps will reduce the mounting debt, which in December 1998 was $18.3 billion.
Economic Figures
2000(F) 1999(E) 1998
GDP Growth (percent) 8.4 0.2 6.5
GDP (MD bn) 391.4 364.6 346.9
GDP per capita (US$) 1,361 1,277 1,249
Agriculture (% of GDP) 16.3 15.5 16.2
Non-Agricultural GDP growth rate 4.2 3.9 3.4
Inflation (%) 1.1 2.7
Exports (%GDP) 24.2 23.8 22.5
Imports (%GDP) 32.2 31.7 30.6
Households Consumption (% GDP) 67.3 67.4 68.0
Imported Services Growth (%) 2.2 2.8 2.5
Exports Growth Rate (%) 2.2 2.5 0.9
Gross Investment (%GDP) 22.7 21.9 21.9
Gross Domestic Saving (%GDP) 21.1 20.4 20.2
Government Revenue (budget)** (MD bn)125.6 118.3 -
Government Expenditure (budget)** (MD bn)141.5 132.1 -
Overall Deficit (budget)** (MD bn) 15.9 13.8 -
Deficit as % GDP (budget) (F)2.0 2.3 -
Fiscal Policy
The Moroccan government has reduced its role in the economy during the last decade. In particular, it ceased direct credit and foreign exchange allocation, reduced trade barriers, restrained government spending, lowered taxes and embarked on a privatization program.
The government has sought to reduce its deficit. In 1995, it rose above 5 percent of GDP, decreasing to roughly 3-4 percent in the late 1990s.
Monetary Policy
Morocco has managed to keep inflation in check during the last decade, averaging less than 3 percent a year.
Balance of Payments
Morocco's chronic merchandise trade deficit is generally offset by receipts from tourism, workers remittances and foreign investment. But a widening gap between deficit and revenues has begun to put pressure on Morocco's foreign exchange reserves. Many economic gains in one sector have been offset by losses in others. For example, foreign investment in 1997 jumped 2.5 percent from $235 million in 1996 to $800.9 million in 1998, but revenues from tourism and worker remittances both decreased by 1.3 percent. In 1997, exports grew 7 percent and imports increased 4.1 percent, but exports remained only 59 percent of imports.
© 2000 Mena Report (www.menareport.com)
