Morocco’s economic growth is expected to decrease by 5% for the first time since the end of the 1990s.
Rabat – Morocco’s economy is bracing for the impacts of three shocks: Two years of drought, the stagnation of economic activity due to COVID-19, and a global recession. These shocks will play a role in shaping Morocco’s economic future, Minister of Economy Mohamed Bechaaboun explained during a government council meeting on Thursday, July 23.
In a presentation on Morocco’s economic development in June and the country’s outlook for the rest of 2020, Benchaaboun detailed the inevitable setbacks of the three simultaneous shocks.
The finance minister’s outlook on Morocco’s economy
The minister forecasts Morocco’s economic growth to decrease by 5% for the first time since the end of the 1990s.
Morocco’s macroeconomic balances will sustain significant repercussions, he added, referring to the national budget deficit and the current account of the balance of payments. The General Treasury of Morocco recorded a budget deficit of $3 billion for the first half of 2020.
Morocco’s foreign trade deficit improved at the end of June, he continued, but remittances from Moroccans residing abroad and income from tourism and foreign investments sharply declined.
Foreign exchange reserves have improved thanks to foreign financing. Meanwhile, the foreign exchange market has stabilized without any intervention from Bank Al-Maghrib, Morocco’s central bank.
The current account deficit of the balance of payments at the end of 2020 will reach 8% of GDP, Benchaaboun predicted.
The Moroccan government implemented a finance law at the end of June 2020 in order to reform the economy. However, due to the COVID-19 pandemic, prolonged drought, and global economic recession, Benchaaboun admitted that Morocco has suffered a significant drop in fiscal resources compared to the Ministry of Economy’s preliminary estimates.
Current expenditures, he continued, are at the same level as preliminary estimates. He attributed this consistency to the measures the ministry and government have taken to support the Moroccan economy amid the unprecedented COVID-19 crisis.
In view of these developments, Benchaaboun expects the budget deficit to stand at 7.5% and the debt ratio at 75.5% of GDP.
The future of Morocco’s economy, however, remains dependent on the evolution of the COVID-19 epidemic in the coming months, the minister clarified.
Can the amended finance bill save Morocco’s economy?
Morocco is moving ahead with an amended version of the 2020 Finance Bill, which aims to establish sectoral conventions to relaunch Morocco’s COVID-19-battered economy. The conventions would consider the specific needs of every sector and the varied impacts of the COVID-19 crisis.
The amended finance bill includes $518 million to support businesses — including public enterprises — in their relaunch period.
Under the finance bill, Moroccan businesses are also set to benefit from loans with a maximal interest rate of 3.5%, a reimbursement period of seven years, a two-year grace period, and a state guarantee of the loans.
Administrative reforms in the bill include consolidating Morocco’s business climate by simplifying and digitizing administrative procedures and generalizing payment through electronic methods.
The preservation of jobs is a central element of the amended text. The bill is set to facilitate social and economic support for sectors in difficulty, such as transportation and tourism. It will also allow 80% of employees registered under the National Social Security Fund (CNSS) who are working in hard-hit sectors to keep their jobs.
The employment aspect of the bill is especially urgent as Morocco’s Ministry of Labor predicts a loss of 712,000 jobs and an unemployment rate of 14.8% in 2020. In May, the country’s unemployment rate reached 10.5%, with 1.292 million people out of work.
Morocco’s economy may face uncertainty, but the government’s top officials hold out hope for the future.
Head of Government Saad Eddine El Othmani announced Wednesday that Morocco is set to create more than 120,000 direct and indirect jobs over the next three years and attract more than $1.06 billion in foreign direct investment.
Although Morocco’s economy still has a long road to recovery, the head of government is confident the country can become a regional and African leader.