MOROCCO

The Covid-19 crisis caused a major contraction in Morocco's tourism activity, remittance inflows and merchandise exports (automotive, aerospace and electronics). In addition, the strict implementation of lockdowns and social distancing measures dampened domestic demand. GDP was slashed by -6.3% in 2020, also reflecting poor agricultural production (following a second consecutive year of severe drought) together with the historic drops in tourism and manufacturing activity.

With the impulse of recovering demand, we expect the Moroccan economy to rebound by +4.6% in 2021 and by +3.8% in 2022. The normalization of cereal crops (thanks to improved rainfall), new infrastructure projects and manufacturing and mining sector expansion will be the main drivers of growth. Industrial production has shown a faster recovery than services in 2021, with the phosphate and automobile sectors benefitting from buoyant global demand. On the other hand, the textile and aerospace sectors have been lagging behind, still hampered by the long-lasting scars of the crisis.

Morocco’s healthcare system is overall well equipped to handle rising infections and new waves of the pandemic. Despite important organizational and logistic challenges, the kingdom put in place large-scale Covid-19 vaccination campaigns with greater success than most regional peers. Nevertheless, the sanitary situation remains fragile and the country's large tourism sector remains severely affected by international travel restrictions.

Despite rising global food and energy prices, consumer price inflation remains contained and hovers around 1%. In this context, we expect the central bank to continue its accommodative stance throughout the year after cutting policy rates from 2.25% to 1.5% in 2020.

During the pandemic, the Moroccan authorities adopted a battery of measures (e.g. direct transfers to formal and informal workers, government guaranteed bank loans to firms) to mitigate the impact of the economic shock on households and companies. Yet, despite the financial support, the crisis took a toll on incomes, especially in the informal sector (21% of GDP). While the official unemployment rate reached 12.5% in Q1 2021, youth unemployment (36% in 2019) is likely to have soared above 40% after the pandemic.

Morocco’s World Bank Ease of Doing Business ranking has improved by seven places to 53 between 2019 to 2020. Access to credit (ranking 119/ 190) remains one of the country's main weaknesses. Financial inclusion is also low, with only 29% of households holding a bank account.

Moroccan authorities have recently engaged in an ambitious reform agenda to raise potential growth and maintain Morocco’s position as one of the most attractive markets in the MENA region. The launch of a strategic investment fund in 2021, in cooperation with the private sector, will support the country's economic transformation towards major infrastructure projects. In this context, the development of new roads in rural areas is expected to mitigate regional income disparities. The World Bank approved a USD450mn loan in July 2021 to support Morocco’s reform initiatives to increase public access to financial and digital services.