The COVID-19 crisis has impacted Morocco’s foreign currency reserves, which are grounded in tourism income, money transfers of Moroccans residing abroad, and foreign direct investment.
Rabat – In its annual macroeconomic and rate report, Moroccan investment bank CDG Capital said the COVID-19 crisis and drought year has strongly impacted the evolution of Morocco’s main macroeconomic balances in 2020.
The severity of COVID-19’s economic impact largely depends on the duration of the crisis and the depth of its effects on the stability of the national monetary and financial system.
CDG explained that accurate forecasts of COVID-19’s economic impacts should reference similar crises in recent decades. However, the unprecedented nature of the pandemic and the lack of comparable recent crises make concrete economic predictions difficult.
The bank’s report added that economic growth and inflation largely depend on the performance of the agricultural season.
Morocco’s agricultural performance has suffered due to a two-season drought, despite the country’s diversification efforts under the Moroccan Green Plan (PMV).
The climate conditions of the 2019/2020 agricultural season caused a decline in crop production in 2019 estimated at 52 million quintals, recording a 49.3% drop compared to 102.6 million quintals in the 2017/2018 season.
The crop production in the last two agricultural seasons has stayed below the ten-year average, estimated at 80 million quintals.
Data available at the end of February reveal a low vegetation cover, a rainfall down 38% compared to the previous year, and a low filling rate of dams standing at 47.3% at the end of January 2020 against 60% a year earlier.
Nonagricultural growth is forecasted to drop significantly to 1.2%, generating a decline in national growth for the second consecutive year.
Meanwhile, foreign exchange reserves are expected to face negative impacts from the decline in the tourism balance, money transfers of Moroccans residing abroad (MREs), and foreign direct investment (FDI).
“On the basis of a 50% drop in the travel balance, 30% in MREs transfers and 42% in FDI, the overall net flow should fall from MAD 87.3 billion to MAD 54.5 billion in 2020,” CDG Capital predicted.
However, Minister of Economy Mohamed Benchaaboun is confident the Moroccan economy is resilient enough to withstand the short-term economic impacts of the pandemic.
In an interview with L’Economiste on April 3, Benchaaboun underlined potential sources of economic support for Morocco as stemming from international financial markets or the International Monetary Fund, if foreign reserves take a hard enough hit.