Morocco's Economy Projected to Grow 5.5% in 2013 (OBG)
5 January 2013
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While Morocco's economic growth slowed in 2012, it is expected to recover in 2013, according to the IMF. Thanks to short and long-term measures aimed at improving the country's fiscal health and a good performance in some sub-sectors, the Moroccan economy is expected to grow by 5.5% in 2013. An Oxford Business Group report.
In 2011, Morocco outperformed all other North African economies, with annual growth of 4.9%, according to IMF figures published in August. However, internal and external difficulties led to a slowdown in the country's economic growth to 2.9% in 2012, even though the construction sector and key industries such as manufacturing experienced significant acceleration, offsetting declines in other sectors, including agriculture. The global rise in food and fuel prices weighed heavily on Morocco's public finances during the first half of the year and weakened the country's economic position, while foreign demand for exports, especially from Europe, decreased, reducing tax revenues and worsening the external accounts. However, according to the IMF, the current account deficit is expected to fall from 8% to 7.4% of GDP by the end of 2012, and to continue improving in 2013 thanks to increased exports of phosphates and manufactured products. In addition, the fiscal deficit is expected to fall by 0.8 percentage points to 6.1% of GDP by the end of 2012. The deficit is expected to continue to decline in 2013 to 5.3%.
Restoring the Budget Surplus
Morocco is taking steps to restore a budget surplus and foreign reserves, with priority given to revising a costly system of public subsidies for food and energy products, estimated at 15% of public spending, as well as reforming an underfunded pension system. While the implementation of tax reform will take time, international players have expressed confidence by supporting the IMF's decision to grant Morocco a $6.2 billion precautionary credit line in June. To obtain adequate financial support, Morocco launched a $1 billion 10-year bond issue on December 5. This was the country's first international dollar-denominated bond issue. Having received a BBB rating from Standard & Poor's (S&P), the bond was heavily oversubscribed and Morocco launched another $500 million bond, this time with a 30-year maturity, which attracted an additional $2 billion in bids. The Moroccan agricultural sector, which contributes about 13% to GDP and provides 40.3% of employment, was hard hit by bad weather conditions in 2012. Wheat production fell by 39% year-on-year, reaching only 5.1 million tons for the 2011-2012 season, meaning that Morocco will probably have to import an additional 4 million tons of soft wheat by May 2013, pushing imports to their highest level in 30 years. The government is seeking to launch modernization and aggregation projects, introduced as part of the agricultural development strategy known as the Green Morocco Plan (GMP), to help boost production of key crops in the medium term.
Strategic Production Zones
In 2012, Morocco also made significant progress in its labor-intensive, export-oriented industrial sector, with aeronautics and automotive manufacturing recording the best performances. Exports of aeronautical components increased by 18% year-on-year, reaching 4.64 billion dirhams (€417.1 million) at the end of September, while exports from the automotive sector increased by 7%, reaching 18.3 billion dirhams (€1.6 billion). The country is seeking to encourage foreign investment through the development of industrial free zones in strategic production areas, including a zone dedicated to the aeronautics industry, currently under construction in Nouaceur. In June, Bombardier purchased land in Nouaceur to build an aircraft component manufacturing plant, at a cost of $200 million. Work is expected to begin by the end of 2012. The Renault car plant, which opened in February in an industrial zone in Mellousa and cost $1.1 billion, is expected to produce 340,000 vehicles in 2013 and then increase to 400,000 per year once it reaches its maximum capacity.
Expansion Hampered by Banking Sector Credit Crunch
The production of phosphates and derived products is also expected to boost economic growth in 2013. In the first three quarters of 2012, the value of raw phosphate exports rose to 9.71 billion dirhams (€872.88 million), compared to 9.26 billion dirhams (€832.43 million) the previous year. The aim of the 130 billion dirham (€11.6 billion) expansion program, which will end in 2020, is to increase production capacity from 30 million to 50 million tons by building four new mines and a 300-km long pipeline. Activities in all sectors of the economy, including social housing projects and renewable energy programs, have boosted the construction sector, which now contributes 6% to GDP. The government intends to finance the construction of 150,000 new social housing units per year until 2015, and also to increase the capacity of solar and wind power plants to 2000 MW each by 2020. A consortium led by Saudi Arabia's ACWA Power International won a contract in September to build a 160 MW solar power plant in Ouarzazate, with launch scheduled for 2015. However, many expansion programs are likely to be limited by the credit crunch currently affecting the Moroccan banking sector, where lending has fallen considerably in the last three years. The central bank's efforts to reform the sector and comply with Basel III standards should help increase its liquidity in the medium term. Measures to raise the solvency ratio to 12% and increase the capital adequacy requirement to 9% will take effect in June 2013 to provide a solid basis for lending. In the long term, the Moroccan financial sector is set to develop thanks to the government's efforts to make Casablanca a regional financial hub, particularly through the Casablanca Finance City special economic zone project. In 2013, the Moroccan economy will still feel the effects of the eurozone crisis, as well as the high price of food and fuel. However, organic growth in many sectors and government efforts to strengthen fiscal policies should build a solid foundation for future growth.
Maghrebemergent.info
Posted on January 5, 2013.
In 2011, Morocco outperformed all other North African economies, with annual growth of 4.9%, according to IMF figures published in August. However, internal and external difficulties led to a slowdown in the country's economic growth to 2.9% in 2012, even though the construction sector and key industries such as manufacturing experienced significant acceleration, offsetting declines in other sectors, including agriculture. The global rise in food and fuel prices weighed heavily on Morocco's public finances during the first half of the year and weakened the country's economic position, while foreign demand for exports, especially from Europe, decreased, reducing tax revenues and worsening the external accounts. However, according to the IMF, the current account deficit is expected to fall from 8% to 7.4% of GDP by the end of 2012, and to continue improving in 2013 thanks to increased exports of phosphates and manufactured products. In addition, the fiscal deficit is expected to fall by 0.8 percentage points to 6.1% of GDP by the end of 2012. The deficit is expected to continue to decline in 2013 to 5.3%.
Restoring the Budget Surplus
Morocco is taking steps to restore a budget surplus and foreign reserves, with priority given to revising a costly system of public subsidies for food and energy products, estimated at 15% of public spending, as well as reforming an underfunded pension system. While the implementation of tax reform will take time, international players have expressed confidence by supporting the IMF's decision to grant Morocco a $6.2 billion precautionary credit line in June. To obtain adequate financial support, Morocco launched a $1 billion 10-year bond issue on December 5. This was the country's first international dollar-denominated bond issue. Having received a BBB rating from Standard & Poor's (S&P), the bond was heavily oversubscribed and Morocco launched another $500 million bond, this time with a 30-year maturity, which attracted an additional $2 billion in bids. The Moroccan agricultural sector, which contributes about 13% to GDP and provides 40.3% of employment, was hard hit by bad weather conditions in 2012. Wheat production fell by 39% year-on-year, reaching only 5.1 million tons for the 2011-2012 season, meaning that Morocco will probably have to import an additional 4 million tons of soft wheat by May 2013, pushing imports to their highest level in 30 years. The government is seeking to launch modernization and aggregation projects, introduced as part of the agricultural development strategy known as the Green Morocco Plan (GMP), to help boost production of key crops in the medium term.
Strategic Production Zones
In 2012, Morocco also made significant progress in its labor-intensive, export-oriented industrial sector, with aeronautics and automotive manufacturing recording the best performances. Exports of aeronautical components increased by 18% year-on-year, reaching 4.64 billion dirhams (€417.1 million) at the end of September, while exports from the automotive sector increased by 7%, reaching 18.3 billion dirhams (€1.6 billion). The country is seeking to encourage foreign investment through the development of industrial free zones in strategic production areas, including a zone dedicated to the aeronautics industry, currently under construction in Nouaceur. In June, Bombardier purchased land in Nouaceur to build an aircraft component manufacturing plant, at a cost of $200 million. Work is expected to begin by the end of 2012. The Renault car plant, which opened in February in an industrial zone in Mellousa and cost $1.1 billion, is expected to produce 340,000 vehicles in 2013 and then increase to 400,000 per year once it reaches its maximum capacity.
Expansion Hampered by Banking Sector Credit Crunch
The production of phosphates and derived products is also expected to boost economic growth in 2013. In the first three quarters of 2012, the value of raw phosphate exports rose to 9.71 billion dirhams (€872.88 million), compared to 9.26 billion dirhams (€832.43 million) the previous year. The aim of the 130 billion dirham (€11.6 billion) expansion program, which will end in 2020, is to increase production capacity from 30 million to 50 million tons by building four new mines and a 300-km long pipeline. Activities in all sectors of the economy, including social housing projects and renewable energy programs, have boosted the construction sector, which now contributes 6% to GDP. The government intends to finance the construction of 150,000 new social housing units per year until 2015, and also to increase the capacity of solar and wind power plants to 2000 MW each by 2020. A consortium led by Saudi Arabia's ACWA Power International won a contract in September to build a 160 MW solar power plant in Ouarzazate, with launch scheduled for 2015. However, many expansion programs are likely to be limited by the credit crunch currently affecting the Moroccan banking sector, where lending has fallen considerably in the last three years. The central bank's efforts to reform the sector and comply with Basel III standards should help increase its liquidity in the medium term. Measures to raise the solvency ratio to 12% and increase the capital adequacy requirement to 9% will take effect in June 2013 to provide a solid basis for lending. In the long term, the Moroccan financial sector is set to develop thanks to the government's efforts to make Casablanca a regional financial hub, particularly through the Casablanca Finance City special economic zone project. In 2013, the Moroccan economy will still feel the effects of the eurozone crisis, as well as the high price of food and fuel. However, organic growth in many sectors and government efforts to strengthen fiscal policies should build a solid foundation for future growth.
Maghrebemergent.info
Posted on January 5, 2013.
