Moroccan economy is the best in Africa
Moroccan Economy on the Right Track
Speaking to IMF Survey, IMF Mission Chief for Morocco, Jean-François Dauphin, said that commendable progress was made, but the economy still faces significant risks that call for sustained implementation of reforms. The IMF is supporting the authorities’ economic program through a Precautionary and Liquidity Line, which serves as an insurance policy to protect the economy in case of severe external economic conditions.
How is the Moroccan economy faring?
Economic imbalances have considerably reduced over the last three years. After significant external shocks hit the economy in 2011-12, the authorities have implemented a package of economic reform policies, supported by an IMF Precautionary and Liquidity Line, to help address economic vulnerabilities. In particular, they achieved a significant reduction in the fiscal deficit and moved ahead with an impressive reform of the subsidy system.As a result, the current account deficit has also narrowed and foreign exchange reserves have increased. The emergence of new export sectors and the recent decline in international oil prices have also played a role in the rebalancing process.
In November 2014, the authorities adopted a new organic budget law, which—once comments from the constitutional council have been addressed—is expected to strengthen and modernize the budget framework. A new banking law was also adopted, which broadens the regulatory and supervisory role of Morocco’s Central Bank.
Nonetheless, the overall unemployment rate remained high at 9.7 percent at end 2014, with youth unemployment around 20 percent. And, much remains to be done to reduce income, gender and regional inequalities.
What is your assessment of the country’s economic outlook?
Dauphin: We expect the Moroccan economy to strengthen going forward. In 2015, economic growth is expected to reach about 4½ percent, inflation is projected to remain low (around 1½ percent), while the fiscal deficit continues to narrow. Assuming steadfast implementation of structural reforms, growth could further accelerate and reach the 5-5½ percent range over the medium term.
However, Morocco still faces significant risks. A protracted period of slow growth in Europe—Morocco’s main trading partner—can result in lower exports, foreign direct investment, tourism, and remittances. A renewed spike in energy prices, stemming from geopolitical tensions in the Middle East and/or the Russia-Ukraine standoff, could result in higher oil imports. A surge in global financial market volatility would also negatively impact the economy. Moreover, it will be important to maintain societal buy-in for reforms.
IMF Survey: In July 2014, the IMF approved a second Precautionary and Liquidity Line in an amount equivalent to about $5 billion. What is this arrangement about and why is it right for Morocco?
The Precautionary and Liquidity Line arrangement is designed to meet the potential liquidity needs of member countries with sound economic fundamentals and track record of policy implementation, like Morocco, but with some remaining economic vulnerabilities and risks.
The IMF created the instrument in 2011 to serve as an insurance policy against unfavorable external economic conditions that are beyond the authorities’ control.
This is the second arrangement that Morocco has had with the IMF since the global crisis, to support the authorities’ home-grown economic reform program. The authorities treated the first arrangement as precautionary and did not draw on its financial resources. Similarly, they don’t plan to draw on resources under the second one. The has just completed the first review of the authorities’ program, which remains on track.
