Rabat – The economic recession that is looming over the European Union will likely have negative repercussions on Morocco’s post-COVID-19 recovery within the tourism industry.
Morocco’s proximity and historic cooperation with the EU would make the North African country highly exposed to the spillover from any recession that would hit the EU, argues a new report from Fitch, an American rating agency.
The report adds that Morocco would be vulnerable to a recession occurring within the EU given the large volume of trade between the two entities. 61% of Morocco’s exports go to the union annually.
A recession in the Eurozone is becoming “more likely,” says Fitch in the report, explaining that the economy is set to contract sharply given the recent drop in gas imports from Russia, raising the possibility of gas rationing.
The prospect of discontinuing gas exports from Russia to the European Union would push energy prices even higher, benefiting gas exporters and hampering growth prospects within energy importing emerging countries.
A sharp rise in energy prices would likely cause Morocco’s economic growth to slow dramatically, as the country currently exports 90% of its energy needs.
In the course of this year, government subsidies for gas have reached an all-time high, according to official sources.
Morocco’s government fund dedicated to subsidizing basic food and energy commodities currently covers 74% of the price of a unit of a gas bottle or MAD 116 ($12.8).
Government spending for gas subsidies is estimated to have reached MAD 9.2 billion ($965.9 million) during the first five first months of 2022.
As the Ukraine war continues to unfold, Morocco’s energy subsidies could increase to a staggering MAD 22 billion ($2,3 billion) at the end of 2022, a 51% year-on-year increase.
Rising commodities prices would continue to drain Morocco’s foreign currency reserves, as the government works to subsidize basic food and energy commodities to preserve the purchasing power of citizens.
Read Also: Fitch Maintains Morocco’s CIH Rating At ‘BB’Stable
