Meknes – The International Monetary Fund (IMF) estimates that Morocco’s gross domestic product (GDP) will increase by 4.5% in 2021 thanks to a retreat of drought and waning of the COVID-19 pandemic.
In a press release, Roberto Cardarelli, the head of the IMF mission in Morocco, highlighted the expected effects of the drought and the COVID-19 crisis on GDP in 2020. This year’s GDP may witness a 6-7% contraction.
Cardarelli estimates Morocco’s “fiscal and external deficits” will expand due to the economic recession that has hit tax revenues and the tourism sector.
Morocco, however, has preserved external financing needs by adopting a resilient strategy of remittances and lowering imports, the IMF added. Morocco purchased on April 7 all available resources under the Precautionary and Liquidity Line (PLL), preserving its international reserves above last year’s levels.
Cardarelli expressed satisfaction with Morocco’s strategy to alleviate the economic and social impact of the pandemic. Moroccan authorities have taken measures to contain the repercussion of the COVID-19 pandemic, especially with the creation of the Special Fund for the Management and Response to COVID-19.
King Mohammed VI ordered the creation of the fund in mid-March to boost Morocco’s health system and mitigate the consequences of the pandemic on the country’s economy and society.
Moroccan authorities’ initiative offered wage subsidies, cash transfers to households in the informal sector, and the extension of credit to firms. These measures have sustained domestic demand, protected the most vulnerable, and supported the productive system, added the statement.
The IMF added that “the 2021 Budget continues to support the recovery over the few next years.” Authorities have already announced reforms to the social protection system starting from 2021, responding to King Mohammad VI’s directives in his Throne Day Speech.
The head of the IMF mission in Morocco said his team “also agrees with the authorities that the process of fiscal consolidation should be gradual and begin only once the economic recovery becomes well anchored.”
The statement also noted the “exceptional uncertainty” regarding how long Morocco’s GDP and economy overall will need to recover.
The press release also stated that authorities can, meanwhile, fortify fiscal buffers through extending the tax base, increasing the progressivity of the tax system, rationalizing public administration spending and the privatization program, and financing the extension of social protection programs.