Morocco Economy, Politics and GDP Growth
Morocco: Commitments by Fiscal Year
Morocco’s political landscape has been relatively stable in past decades and evolved smoothly through the Arab Spring. Morocco engaged in a program of wide-ranging reforms with the adoption of a new Constitution in 2011, which set the basis for a more open and democratic society, increased decentralization, modern institutions and a renewed state of law more broadly. The current coalition government, led by the moderate Islamist party, PJD (Party for Justice and Development), is continuing to roll out constitutional reforms and taking bold steps to reduce the fiscal deficit, namely through the phasing out of fossil fuel subsidies.
Following a period of political transition, the country held the much-awaited regional and local elections in September 2015 that defined a new political map where two major political players emerged: ruling PJD and opposition party PAM (Party for authenticity and modernity). While the latter dominated the leadership of the country’s regions (5 out of 12), PJD is the clear winner in the management of Morocco’s largest cities. This new share of political powers will redefine the government coalition that will emerge from the 2016 legislative elections.
After a mixed economic performance in 2014, the Moroccan economy is picking up in 2015. Thanks to an exceptional 2014/2015 agricultural season, economic growth is projected to rebound to 4.7 percent. Inflation has been kept under 2 percent reflecting the continued prudent monetary policy and fall in international commodity prices. The unemployment rate has declined to 9.3 percent but remained close to 40 percent and 20 percent among the urban young and educated, respectively.
Continued progress toward fiscal consolidation and improvement in external indicators underscored Morocco’s commitment to preserve macroeconomic stability. For the third year in a row, Morocco should be able to reduce its fiscal deficit in 2015 to 4.6 percent of GDP and began stabilizing the central government debt at around 66 percent of GDP. Improvements on the external front have been more significant. The current account deficit, which culminated to 10 percent of GDP in 2012, was reduced to 4.6 percent of GDP in the first half of 2015. On the capital account side, financial inflows continued to be buoyed by relatively high FDI, support from the Gulf Cooperation Council (GCC), and financial assistance from development partners, including the World Bank Group.
Morocco’s economic outlook hinges on the pursuit of sound macroeconomic policies and an acceleration of structural reforms. With a return to normal rainfall conditions in 2015/2016, overall GDP growth is projected not to exceed 3 percent in 2016. The 2016 Finance Law currently under preparation should confirm the authorities’ resolution to solidify the tax base, rein in expenditures and further reduce the deficit to 3.7 percent of GDP in line with the Government’s commitment to achieve the 3 percent of GDP target by 2017. With the current oil price projections, Morocco’s external position is also expected to strengthen over the medium term.
Morocco continues to face the key challenge of leveraging its political stability, proximity to Europe, and relative investment attractiveness into a decisive edge for rapid and inclusive economic catching-up. Notwithstanding a respectable economic performance, the economy has remained structurally oriented toward non-tradable activities (such as construction, public works, and low value-added services) and a volatile, weakly productive agriculture. Morocco has yet to secure the productivity and competitiveness gains needed to further integrate into world markets, create jobs for the millions of unemployed youth and women, and support the emergence of a larger middle class. The challenge of further reducing poverty and increasing shared prosperity, including through well targeted social safety nets, remains paramount.
Morocco: Commitments by Fiscal Year
Morocco’s political landscape has been relatively stable in past decades and evolved smoothly through the Arab Spring. Morocco engaged in a program of wide-ranging reforms with the adoption of a new Constitution in 2011, which set the basis for a more open and democratic society, increased decentralization, modern institutions and a renewed state of law more broadly. The current coalition government, led by the moderate Islamist party, PJD (Party for Justice and Development), is continuing to roll out constitutional reforms and taking bold steps to reduce the fiscal deficit, namely through the phasing out of fossil fuel subsidies.
Following a period of political transition, the country held the much-awaited regional and local elections in September 2015 that defined a new political map where two major political players emerged: ruling PJD and opposition party PAM (Party for authenticity and modernity). While the latter dominated the leadership of the country’s regions (5 out of 12), PJD is the clear winner in the management of Morocco’s largest cities. This new share of political powers will redefine the government coalition that will emerge from the 2016 legislative elections.
After a mixed economic performance in 2014, the Moroccan economy is picking up in 2015. Thanks to an exceptional 2014/2015 agricultural season, economic growth is projected to rebound to 4.7 percent. Inflation has been kept under 2 percent reflecting the continued prudent monetary policy and fall in international commodity prices. The unemployment rate has declined to 9.3 percent but remained close to 40 percent and 20 percent among the urban young and educated, respectively.
Continued progress toward fiscal consolidation and improvement in external indicators underscored Morocco’s commitment to preserve macroeconomic stability. For the third year in a row, Morocco should be able to reduce its fiscal deficit in 2015 to 4.6 percent of GDP and began stabilizing the central government debt at around 66 percent of GDP. Improvements on the external front have been more significant. The current account deficit, which culminated to 10 percent of GDP in 2012, was reduced to 4.6 percent of GDP in the first half of 2015. On the capital account side, financial inflows continued to be buoyed by relatively high FDI, support from the Gulf Cooperation Council (GCC), and financial assistance from development partners, including the World Bank Group.
Morocco’s economic outlook hinges on the pursuit of sound macroeconomic policies and an acceleration of structural reforms. With a return to normal rainfall conditions in 2015/2016, overall GDP growth is projected not to exceed 3 percent in 2016. The 2016 Finance Law currently under preparation should confirm the authorities’ resolution to solidify the tax base, rein in expenditures and further reduce the deficit to 3.7 percent of GDP in line with the Government’s commitment to achieve the 3 percent of GDP target by 2017. With the current oil price projections, Morocco’s external position is also expected to strengthen over the medium term.
Morocco continues to face the key challenge of leveraging its political stability, proximity to Europe, and relative investment attractiveness into a decisive edge for rapid and inclusive economic catching-up. Notwithstanding a respectable economic performance, the economy has remained structurally oriented toward non-tradable activities (such as construction, public works, and low value-added services) and a volatile, weakly productive agriculture. Morocco has yet to secure the productivity and competitiveness gains needed to further integrate into world markets, create jobs for the millions of unemployed youth and women, and support the emergence of a larger middle class. The challenge of further reducing poverty and increasing shared prosperity, including through well targeted social safety nets, remains paramount.
