Despite issues in meeting projected growth indicators, Morocco's Long-Term Foreign-Currency Issuer Default Rating (IDR) offers a “stable outlook” and broadly promising prospects.
Rabat – The outlook comes from a recent Fitch Ratings analysis.
As Morocco’s government keeps its traditional policy of subsidizing commodities such as butane gas, sugar, and flour, the budget deficit and public debt figures in 2018 are set to be far higher than initially expected by government calculations.
While the government planned to narrow the central government budget deficit to 3.0 percent in 2018 from 3.6 percent of GDP in 2017, the analysis predicted the deficit will actually widen to 3.8 percent of GDP.
Social programs were prioritized in Morocco’s proposed budget for the 2019 fiscal year. The goal of the government’s social policies was to support consumers’ purchasing power and decrease socio-economic disparities.
However, as it came at the expense of an inclusive-growth-oriented fiscal policy, overemphasis on social policies only exacerbated citizens’ discontent, according to Fitch.
“Despite strong investments in infrastructure and manufacturing capacities in recent years, Morocco’s non-agricultural activity has failed to accelerate and job intensity of growth remains low, resulting in only small improvements in employment and social indicators.”
But the picture is not all bleak. In fact, according to the rating, there are many reasons to be optimistic about Morocco’s prospects, especially in the medium and long-term.
Positive indicators include “fiscal consolidation leading to a trend reduction in government debt/GDP;” “sustained improvement in the current account balance consistent with declining net external debt-to-GDP;” and “stronger growth potential and an improvement in development indicators” over the medium-term.
Suggesting that the positive indicators outweigh the persisting structural setbacks and the potential risks, Fitch Ratings gave Morocco a BBB- rating. The rating, Fitch explained, indicates an overall “stable outlook” for Morocco’s doing business index.
“Morocco’s ‘BBB-‘ rating is supported by a track-record of macroeconomic stability, comfortable external buffers and a low share of foreign-currency debt in public debt,” Fitch