Rabat - Assessing the economic, social, and environmental situation of the kingdom in its latest annual report addressed to King Mohammed VI, the Economic, Social and Environmental Council (EESC) has drawn up a comprehensive portrait of Morocco, highlighting its progress while stressing its faults.
Rabat – Assessing the economic, social, and environmental situation of the kingdom in its latest annual report addressed to King Mohammed VI, the Economic, Social and Environmental Council (EESC) has drawn up a comprehensive portrait of Morocco, highlighting its progress while stressing its faults.
Economic growth, employment, government finance: the EESC scrutinized the economic climate in the kingdom. The council, an independent institution, recalled the “poor performances” recorded last year, with a grave slowdown in GDP growth from 4.5 percent in 2015 to 1.2 percent in 2016.
An economy dependent on the heavens
Echoing the findings of other institutions such as the High Commission for Planning (HCP) and the Organization for Economic Co-operation and Development (OECD), the EESC confirmed through its report the “vulnerability of the Moroccan economy to the vagaries of the climate.”
In 2016, GDP growth slowed significantly to 1.2 percent following a contraction in agricultural value added. As the saying goes, the Moroccan economy is indeed dependent on the heavens, and the deficit in rain-fall over the past year has been the most severe in thirty years.
The EESC highlighted the failure of the the past few government coalitions to efficiently deal with this dependence. Throughout the last decade, none of the elected governments have been able to set up the valves and levers necessary to get out of this rain dependency, which to some is inappropriate for the new Morocco that seeks to emerge as a global economic player.
Again, as the report argues, non-agricultural value added has evolved at a very moderate pace, despite a slight acceleration in 2016, reaching 2.2 percent instead of 1.8 percent a year earlier. This level was mainly due to a significant slowdown in the manufacturing industry and weak performances in construction and mining, despite the recovery and slight increase in the value added in the tertiary sector.
An non-inclusive growth
For employment, the report reveals similarly disappointing figures: 37,000 jobs were lost in 2016, contrasting heavily the 33,000 were created in 2015.
Once again, climate played a decisive role. The agriculture, forestry, and fisheries sector recorded a net loss of about 120,000 jobs between 2015 and 2016, due to the poor agricultural season. However, wage employment saved the stake in 2016, managing to balance the loss with more than 20,000 salaried jobs and 100,000 as part of self-employment created in 2016.
The EESC also highlighted to positive role played in this direction by the new legislative framework on self-employment and further measures to promote this type of work. Nonetheless, the council stressed the vulnerability of job creation in Morocco, explaining that it has a structural character that has become more pronounced over the years.
The EESC’s report also unveiled the weak points of Morocco’s employment policy, which is struggling to get under way. This, according to the organization, was evidenced by the growing relationship between economic growth and employment.
During the 2003-2006 period, one additional point in economic growth made it possible to create more than 38,000 jobs on average year-on-year. However, this performance has declined steadily, reaching 25,000 jobs per point of growth between 2007 and 2011, and then 12,000 between 2012 and 2015.
In other words, the EESC states that growth, being less inclusive, has little impact on job creation. In this context, the participation rate of the working-age population fell to 46.4 percent in 2016 from 47.4 percent in 2015.
The participation rate of women continues to deteriorate, reaching 23.6 percent, with 16.6 percent in urban areas in 2016, compared to 70.8 percent for men. Moreover, more than two thirds of the unemployed population have been unemployed for more than a year, and 64.8 percent of them are between 15 and 29 years of age.
The EESC also points out that the unemployment rate of university graduates is over 25 percent, while that of vocational training graduates is over 22 percent.
Modest recovery of government finances
Despite this unfavorable environment, government finances improved slightly in 2016. The budget deficit continued its downward trend, from 4.2 percent of GDP in 2015 to almost 4 percent in 2016, while remaining above the level of 3.5 percent provided for by the Finance Act.
For the EESC, the government’s control of current expenditure, combined with better mobilization of tax revenues, played a key role in this deficit decline. This is quite a feat in a context of weak growth, an increase in VAT credit repayments, central warranty grant inflows that are below expectations, and a sustained pace in investment spending.
In terms of external accounts, 2016 was marked by a trade deficit of goods that increased by 19.4 percent compared to the previous year, reaching MAD 184.6 billion. As a result, the rate of import coverage by exports has reversed the upward trend seen over the last three years, declining from 58.6 percent in 2015 to 54.8 percent in 2016, despite the good performance of travel receipts and remittances by the Moroccan diaspora.
As for FDI, they fell by 28.2 percent in one year, while direct investment by Moroccans abroad stagnated at around MAD 6.3 billion after a significant increase in 2015. At the same time, foreign exchange reserves increased by 12.1 percent year-on-year to MAD 252 billion by the end of 2016, equivalent to seven months of imports of goods and services.
The recommendations of the EESC
For the council, is it crucial for the kingdom to set up mechanisms to reduce the volatility of rural incomes, by financing rural non-agricultural project portfolios that create jobs and increase local demand during bad seasons.
At the same time, the council recommended that Morocco support the expansion of the national production base, in terms of the number of enterprises created, in order to compensate for the capital-intensive nature of the new sectors and create jobs of sufficient quality.