Morocco aims to achieve herd immunity against COVID-19 and significantly improve employment and economic productivity.
Rabat – Morocco’s central bank, Bank Al-Maghrib, is hopeful the COVID-19 vaccine will help accelerate the country’s economic recovery.
Morocco is poised to launch a 12-week vaccination campaign to protect frontline workers and at-risk populations from COVID-19. The campaign will first use the Chinese-made Sinopharm vaccine and aims to cover at least 80% of the Moroccan population to achieve herd immunity.
Bank Al-Maghrib, in its quarterly report, said that although the outlook for Morocco’s economic development in 2021 and 2022 remains uncertain, the vaccination campaign and the Mohammed VI Investment Fund should support the country’s recovery.
King Mohammed VI called on the Moroccan government to establish the investment fund in his 2020 Throne Day speech on July 29. He said the fund should encourage investment in Morocco and help revive the national economy.
Due to the COVID-19 crisis, Morocco recorded a net loss of 581,000 jobs during the third quarter of 2020 compared to the same period in 2019. The unemployment rate worsened from 9.4% in 2019 to 12.7% in 2020. Reducing the country’s unemployment rate in 2021 is a critical component of Morocco’s economic recovery.
Optimistic long-term outlook
Morocco is set to conclude 2020 with 6.6% contraction of the national economy. The country will also suffer a decline of 5.3% in agricultural value-added and 6.6% in non-agricultural value.
However, Bank Al-Maghrib predicts rebounds of 4.7% in 2021 and 3.5% in 2022.
Moroccan exports are currently down 10.1% due to declines in sales in the automotive and textile sectors. Morocco’s aeronautics sector also suffered a drop of 14% in recent months amid a 75% decline in the sector’s activity globally, the minister of industry said Monday.
The central bank expects exports to recover and sales in the automotive sector to increase next year with revived production at the PSA plant.
Imports, however, are also set to increase, particularly in terms of purchases of capital goods.
Financial operations declined in 2020 to account for an equivalent of 2.3% of GDP. Bank Al-Maghrib is confident, however, that foreign direct investment (FDI) inflows will soon “resume their dynamic to reach a volume corresponding to 3.1% of GDP annually.”
The current account deficit should decrease to 3.3% of GDP in 2021 and stand at 3.9% in 2022 as part of Morocco’s economic recovery.
Bank Al-Maghrib said the direct debt of the General Treasury is set to increase by 11 points of GDP to 76% at the end of this year and reach 79.3% of GDP at the end of 2022.
Official reserve assets should stand at MAD 321.9 billion ($36 billion) at the end of 2020.
Effective fiscal policy
Bank credit, despite the sharp contraction in economic activity, should maintain a steady pace thanks to fiscal and monetary measures. Bank credit intended for the non-financial sector should see an overall increase of 4.3% in 2020 and 2021 and of 4.5% in 2022, according to the central bank.
Fiscal consolidation should gradually resume given the 2020 Finance Law, the bank said. The deficit, excluding privatization, should decline to 6.5% of GDP in 2021 and to 6.4% in 2022.
Bank Al-Maghrib decided Tuesday to maintain the 1.5% key rate to support Morocco’s economic recovery given the exceptional circumstances amid the COVID-19 pandemic.
“The real economy must take advantage and benefit significantly from the historic and significant drop in the key rate to 1.5%,” said Abdellatif Jouahri, the wali (governor) of the central bank, after the bank’s quarterly meeting.
Bank Al-Maghrib has so far responded to all requests for financing from commercial banks since March, he added.