By Adam Brown
By Adam Brown
Rabat – When voting comes to a close Friday the newly elected Moroccan Parliament will inherit several major economic concerns.
2016 has been a troublesome year for several aspects of the Moroccan economy, specifically the agricultural sector and youth employment. These factors, coupled with a decrease of Foreign Direct Investment and continued rising national debt require urgent attention from the new government.
Slowing Economic Growth
Over the course of 2016 the Moroccan economy has experienced decreases in the agricultural sectors of production as a consequence of the ongoing drought. Due to Morocco’s reliance on agriculture as part of national GDP, this decrease in production will likely have a large negative impact on national GDP growth. According to the World Bank’s fall 2016 report, by the end of 2016 the Moroccan economy is expected to experience a reduction of GDP growth by 1.5%.
Agricultural GDP growth is expected to contract by 9.5%, a 22.5% change from the positive growth experienced in 2015. Other sectors such as industry and services will experience some small growth on the order of .2% respectively.
National unemployment has remained fairly consistent throughout the previous administration, but the youth subgroup has experienced increased unemployment in 2016. According to Reuters, national unemployment has been reported at 8.6% of the population in the second quarter of 2016. However, the new parliament inherits elevated youth unemployment.
According to the High Planning Commission (HCP), youth (15-24) unemployment increased by 3% through the first quarter of 2016 to 23%. Urban youth unemployment is particularly high, reaching 38% during June of 2016. Youth unemployment has been addressed by the previous administration through the National Strategy for Unemployment, but still remains a pressing matter for the newly elected parliament.
As part of the initiative to reduce unemployment, job creation has been promoted in other sectors, such as industry and services. However, the new parliament must find new methods to replace jobs lost in the agricultural sector. According to Reuters, 175,000 jobs were lost in the agricultural sector.
This was offset by the creation of 149,000 jobs spread across services, building activity, and industry. However, “Jobs created by construction and services are mostly precarious” (Reuters). The new parliament is faced with the challenge of creating less agriculture-centric jobs that are more stable than those created in 2016.
Decreasing Foreign Direct Investment
The first half of 2016 has seen a large decrease in the inflow of Foreign Direct Investment (FDI). According to the World Bank, FDI inflow has decreased by 11.2%. Morocco received approximately 3.16 billion USD in 2015. A reduction of 11.2% over the course of 2016 would mean a loss of 176 million USD for the Moroccan economy. This will directly affect the Moroccan GDP as well as private sector job creation, limiting industry growth.
Rising National Debt
The new parliament will inherit increased national debt, but also a reduced fiscal deficit. Since 2011 the Moroccan national debt has increased by 9% of GDP. World Bank projects national debt to be at 64.6% of GDP by the end of 2016. The fiscal deficit is projected to be reduced by .9% of GDP by the end of 2016 with a fiscal balance of -3.5% of GDP. This reduced fiscal deficit bodes well.
If the new government can continue the trend of reduction they may be able to put capital towards paying down debt. However, the new government will need to take aggressive action in order to see results in debt reduction.