Rabat – Fitch Solutions, a foundation which provides credit and macro intelligence solutions, forecast a marginal narrowing of Morocco’s budget deficit in its July 24 commentary, “Privatization To Lift Morocco’s Government Revenue.”
The foundation reported that Morocco’s budget deficit would shrink to 3.6% of GDP in 2019, and 3.5% in 2020, from an estimated 3.7% in 2018.
Fitch Solutions estimated that the privatization of state-owned assets will lift the country’s revenue. The foundation also expects the Moroccan government to introduce more generous spending measures over the coming quarters due to risks of social unrest.
However, both measures would mean a slow pace of deficit reduction.
Privatization of State assets
According to the commentary, Morocco’s plans to privatize public companies will allow the government to “increase spending without raising taxes.”
“The Moroccan authorities will move forward with a planned sale of an 8% stake in telecommunication firm Maroc Telecom, selling 6% to local institutional investors and 2% on the Casablanca stock exchange in 2019,” says Fitch Solutions.
“This move will generate substantial revenue gains, likely close to $1 billion according to government estimates,” adds the commentary.
Other privatization prospects include La Mamounia hotel and the Tahaddart power plant.
New Taxes in 2019
Fitch Solutions predicts that the new taxes enforced in 2019 will have a positive impact on Morocco’s revenue.
The foundation’s “preliminary estimates point to 4.5% growth in tax revenues in the first six months of 2019 compared to a year earlier.”
They link this change to a number of newly introduced taxes, such as “a 2.5% social solidarity contribution on firms with earnings exceeding MAD 40 billion (in place until the end of 2020) and excise taxes on sugary drinks and tobacco.”
Government solutions to social unrest
“We believe the government will continue to introduce more generous spending measures in a bid to temper social unrest,” said Fitch Solutions.
The foundation mentions that the Moroccan government responded to recent labor union protests by “introducing a public sector wage hike and an increase in government-funded family allowances of up to $30 per family.”
Morocco faces limited risks
Fitch Solutions concluded that, overall, Morocco’s fiscal trajectory will face limited risks.
The commentary recalls that “Morocco’s government debt-to-GDP ratio came in at 65.3% of GDP in 2018,” forecasting an increase to 66.7% in 2019 and 68.0% in 2020.
