Morocco

It’s oh so quiet

B2

MEDIUM RISK for entreprise

  • Economic risk

  • Business environment risk

  • Political risk

  • Commercial risk

  • Financing risk

GDP USD118bn (World Ranking 59, World Bank 2018)
Population 36mn (World Ranking 40, World Bank 2018)
Form of state Constitutional Monarchy
Head of government Saadeddine Othmani (Prime Minister)
Next elections 2021, legislative
  • King Mohammed VI remains generally popular and rule by the monarchy is an acceptable form of governance for the majority of the population.
  • Sound commercial and diplomatic relations with the U.S. and the EU.
  • Economic resilience to volatile agricultural output, particularly resulting from periodic drought.
  • Geographic proximity to a very large potential market (Europe) for international investors and traders.
  • Although external debt stock has increased in recent years, debt servicing obligations remain manageable.
  • Poor corporate payment behavior: Days of Sales Outstanding was 84 days in 2018 (one of the longest in the world) and insolvencies are increasing as a result.
  • Wide gap between rural and urban standards of living.
  • Poverty and unemployment remain high and are a principal cause of social discontent and provide a potential breeding ground for religious militancy.
  • Weak record in relation to abuses of human rights and to press freedom.
  • Although the monarchy remains popular and some reforms have been implemented there are lingering concerns that the government is merely a vocal expression of palace authority.

Steady growth despite high volatility of the primary sector

The resilience of the Moroccan economy was remarkable in the last 20 years. This contrasts with the 1990s when Morocco experienced four years of recession. Growth remained robust in 2009, as well as during the Eurozone crisis (+4.2% in 2009, +3% in 2012). This is explained by the prudent policy-mix, as well as a good management of foreign exchange reserves (good import cover levels, about 6 months) which is a key buffer.

The main source of growth volatility was domestic, namely in the agricultural sector. It accounts for about 13% of GDP and a staggering 35% of employment. The unpredictable and sometimes bad weather had a massive impact on crop yields. In 2016, the poor output cut overall GDP growth by -3pp. In 2017, good crops and output recovery to 2015-highs explain the +4.1% GDP growth. Moreover, the trend improvement in agricultural productivity (use of fertilizers, a key comparative advantage of Morocco among the main producers of phosphate) is a structural growth driver. Fertilizers are also among the main export sectors.

Compared to agriculture, the non-agricultural value added is growing at a steadier and more modest rate. But it showed a trend increase from +1.5-2% y/y two years ago to +2.5-3% y/y during the last quarters.

The main change during the last years was the development of a more diversified export sector. Along with a trade and manufacturing hub (Tanger Med), the car industry, aeronautics and pharmaceuticals benefitted from increasing foreign direct investment during the last years and are now able to export more. As a result, exports are growing by +8% per year and contribute increasingly to Moroccan growth. 

 
 
 

Potential growth is still inhibited by key weaknesses

However, one size does not fit all, and some domestic problems still persist. Investment is strong (30% of GDP) and reforms helped to create many businesses during the last years. However, a poor payment behavior (Days of Sales Outstanding are at 83 days in 2017, one of the highest level in the World) has detrimental consequences on the level of insolvencies; they went above 8000 in 2017 and are again expected to rise in 2019 (+4%).

Social cohesion is also an issue, since jobs created are not enough to cope with population growth. Unemployment is still at 10%, and is particularly pervasive for the youngest population. Education is also another issue. All these issues put the reform agenda at risk, since it can trigger low acceptance of these reforms in the population.

 

Making the most of a pillar position in Africa is not a done job

The World Bank’s 2019 Doing Business survey ranks Morocco 60 out of 190 economies in terms of the overall ease of doing business, among some of the best African economies. Thus the country enjoys a comparative advantage which may help boost its trade and financial relationships in the region. However, Morocco’s painful admission process to the Economic Community of West African States (ECOWAS) shows the difficulties surrounding diversification of exports destinations towards Africa (European economies represent about 75% of Moroccan exports). As more trade relations with neighbors look tricky (protectionism increased in Algeria and Egypt), Morocco had a look to the south but faces some competitors in the region.

 

Trade structure by destination/origin

By destination/origin (% of total)

Exports Rank Imports
Spain 22%
1
14% Spain
France 19%
2
13% France
India 4%
3
8% China
United States 4%
4
7% United States
Italy 4%
5
6% Germany

Trade structure by product

(% of total)

Exports Rank Imports
Electrical machinery (and related) 15%
1
12% Petroleum and related products
Clothing and apparel 14%
2
8% Road vehicles
Road vehicles 10%
3
8% Electrical machinery (and related)
Vegetables and fruits 9%
4
6% Textile yarn and related products
Fertilizers 8%
5
4% Cereals, preparations
The average DSO in Morocco remains high at 83 days on average in 2016 and the payment behaviour of domestic companies is rather poor.
 

  • Low

  • Medium

  • Sensitive

  • High

  • Payments

  • Court proceedings

  • Insolvency proceedings

The judiciary is a multi-layered system which remains under influence and is critcized for its lack of organisation, efficiency and transparency.  Therefore, commencing legal action would be unreasonable in most cases whilst enforcement judgments would be difficult. In all circumstances, entrusting collection specialists with a strong knowledge of the local market remains the wiser approach.

Various insolvency proceedings are available in Morocco but these remain complex, slow and mostly inefficient when it comes to collecting debt.

Download the entire collection complexity PDF:

Collection Complexity Morocco

pdf | 698.7 KB

Contact

Contact Euler Hermes

Economic Research Team

research@eulerhermes.com

Country Risk Analyst:

Stéphane Colliac, Julien Aymé-Dolla

stephane.colliac@eulerhermes.com

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