Morocco: why the economy hasn’t collapsed


July 20, 2021 – By Nina Kozlowski
While the impact of the pandemic and the recession were particularly severe in Morocco, 2021 already offers bright prospects for recovery, especially in its key sectors.

In 2020, the kingdom was confronted with the Covid-19 pandemic, which among other things, dried up tourism revenues, as well as drought, which severely affected crops. This double shock caused the loss of more than 430,000 jobs and inflicted a severe 7% recession on the Moroccan economy, while the average growth rate for the North Africa and Middle East (Mena) region was -3.4%. However, the lights already seem to be back on, with good prospects for recovery as early as 2021.
According to the IMF’s projections published in early April, the Moroccan economy is expected to grow by 4.5% in 2021. The 5.3% forecast announced at the end of March by the governor of Bank Al-Maghrib (BAM) is more optimistic, as it takes into account a better than expected agricultural season, the successful completion of the vaccination campaign and the continuation of the fiscal stimulus. Despite spending 11% of its GDP to support the economy and households and a drop in tax revenues of 15 billion dirhams (about 1.38 billion euros) in 2020, Morocco has kept its budget deficit under control (at -7.7% of GDP), as well as its monetary balance. Why has the national economy not collapsed, when almost everyone expected a cataclysm? « The pandemic has shown some weaknesses in the economic system, but it has also revealed strengths, including the solid production capacity of Moroccans and their responsiveness, » says Nabil Adel, economist and founder of the political movement Maan.
The digital transition is working, the production lines have not been interrupted, the food industry has shown great potential, the textile industry too, with its ability to reinvent itself and make masks, for example, » he continues. We were expecting a drastic drop in GDP, but this has not been the case. That said, 2020 is still a blank slate. » Indeed, the country’s main growth engines have, for their part, been brought to a halt: tourism, obviously, but also the automotive and aerospace industries. « But, generally, these are sectors that explode after big crises, » wants to believe Nabil Adel.
Achilles heel: ability to execute

Based on these findings, the Moroccan government has, since September 2020, initiated its industrial recovery plan 2021-2023, in order to support the industrial fabric, which, at the height of the health crisis, has proven that it was able to manufacture products of as good quality, and cheaper, than those manufactured abroad.
At the heart of this strategy: the substitution to imports, the national preference and the public order. The Ministry of Industry has set the goal of replacing 34 billion dirhams (about 3.2 billion euros) of imports with Moroccan production by 2023 (knowing that total imports amounted to 183 billion dirhams in 2019). This plan should generate an export potential estimated at 17 billion dirhams, but also create up to 100,000 jobs and have a positive impact on the balance of trade – about 51 billion dirhams by 2023.

« In terms of planning, Morocco is very good. The problem is the capacity for execution, as the means put in place do not always fit with the objectives, says Nabil Adel. According to several national and international reports, overall, there is a lack of coordination and articulation between the various ministerial departments and administrations. Foreign investors also complain about governance and bureaucratic slowness. If these issues are addressed, the country will have sustained growth. » 

Industrial assets

Although the aeronautics sector was one of the hardest hit by the pandemic – with a 30% drop in exports (i.e. 4.7 billion dirhams) and 1,700 jobs lost out of 17,500 (i.e. 10%, compared with 43% worldwide) – it has already shown its resilience. This is an opportunity for the industry to make a change, by engaging its ecological transition and attracting new opportunities. Confident, the Minister of Industry, Moulay Hafid Elalamy, has already stated that « all aircraft in the world will carry at least one Moroccan part
Africa’s leader in the construction of vehicles for private individuals, the country is also counting on its automotive sector, which has started up again in January 2021. Indeed, at the beginning of the year, Moulay Hafid Elalamy signed two memorandums of understanding with the Japanese Sumitomo and Yazaki, which provides for the construction of four plants, for an overall investment of 912 million dirhams, and the creation of at least 8,300 jobs. As for Renault, the group expects a 10% recovery of activities in Morocco for 2021, or the construction of 150,000 vehicles.

The agri-food industry also has good prospects and expects a 10% increase in exports for the current year. For its part, agriculture is recording excellent harvests and its growth rate is expected to be around 5% for 2021. However, it remains the sector most affected by unemployment, with a loss of 273,000 jobs in 2020, according to the authorities. Le ministère de l’Agriculture a lancé le plan Green Generation 2020-2030, qui donne une grande place à l’agriculture solidaire, aux petits exploitants et aux jeunes du monde rural. As for the offshoring sector, it has already been recovering from the crisis for months and has generated 13 billion dirhams in export revenues by 2020.
The strength of growth in Morocco will also depend on factors that are not strictly economic, such as the pace of vaccination, the wait-and-see nature of reforms on the eve of legislative elections (due to be held in September), the reopening of borders (for tourism) and the deterioration of relations with major partners, in particular Spain, the leading trading partner. « The kingdom would also benefit from taking better advantage of free trade agreements with Europe, » says Nabil Adel.

Source: Jeune Afrique