Rabat – After a poor performance in 2016, a strong rebound in agricultural production should boost Morocco’s economic growth in 2017, affirms the World Bank (WB).
In its latest report, the international financial institution revised the national growth rate to 4.1 percent, up 0.3 points from its June forecast.
The WB explains in the October 2017 Economic Monitoring Report that this increase in growth is due to a 14.3 percent rebound in agricultural GDP, driven by an above-average cereal harvest, against -11.3 percent in 2016, a year marked by a “severe drought.”
The inflation rate is expected to reach 1 percent in 2017 and 1.6 percent in 2018, according to forecasts from the international financial institution, while the current account balance is set at -5.2 percent of GDP in 2017 and -5.3 percent of GDP in 2018.
Referring to the short-term outlook, the World Bank says growth is expected to slow to 3.1 percent in 2018, with job creation remaining weak. For the bank, the good harvest in 2017 will result in a reduction in the base effects in 2018. Growth in the non-agricultural sector, estimated at about 3 percent, will not be sufficient to significantly increase the rate of economic growth.
The WB also stresses that job creation in new industrial sectors and in the services sector is not sufficient to absorb new entrants.
As for the budget deficit, it will continue to decline as the government seeks to reduce it to less than 3 percent of GDP and reduce public debt to 60 percent by 2021.
Among the main fiscal measures taken, the WB cites the increase in VAT receipts and the reduction of tax exemptions (in the agricultural sector), with the aim of consolidating the corporate tax system and better enforcing the tax payments, by the self-employed and the liberal professions.
The WB also highlighted the government’s determination to reduce the civil service payroll, including social security contributions, to 10.5 percent of GDP in the medium term, adding however that dependency on energy imports will be have a strong impact, as the energy bill is expected to increase.
In the medium term, the new government is committed to implementing structural reforms to stimulate potential growth and promote more inclusive growth, strengthen the business environment, modernize public administration, and improve access to quality public services, adds the WB, noting that Morocco intends to join the top 50 of the Doing Business ranking of the World Bank by 2021.
Concerning the risks and challenges facing Morocco, the WB points out spatial disparities in access to services and infrastructure, uneven economic development, and delays in the implementation of key reforms, including budgetary and structural reforms.
Finally, the weak economic outlook in Europe and the persistent risk of a deterioration in the geopolitical situation in the region could slow economic activity due to a decline in exports, FDI flows and remittances.
The WB’s finding come to echo those of International Monetary Fund (IMF), which also increased its forecasts for growth of the Moroccan economy, expecting a rate of 4.8 percent in 2017, instead of 4.4 percent expected there 6 months. In its latest semestrial report on the world economic outlook published two days ago, the IMF lowered its projected GDP growth in Morocco for 2018 to 3 percent, compared with 3.9 percent projected in its April estimate.