Since 2017, Morocco’s growth rate has been oriented on the downside: From +4.2% in 2017, the economy should contract at a rate of -3.9% in 2020, mainly because of the negative impact of the Covid-19 outbreak on activity.

The pandemic has caused a major contraction in tourism activity, remittance inflows and external demand for merchandise exports (automotive, aerospace and electronics). In addition, the strict implementation of a lockdown and social distancing measures dampened domestic demand. Lower oil prices were good news for Moroccan imports but this only partly offset the negative economic impact of Covid-19. Morocco’s fiscal and current-account deficit are expected to widen during 2020 to -8.9% and to -8.2%, respectively. Government support to fight the pandemic is expected to increase public debt in 2020 (66.8% of GDP), and it is likely to diminish only after 2024.

In 2019, the automotive sector had already levelled off as a direct consequence of difficulties in the European car industry. Conversely, the tourism industry had delivered positive results, thanks to inflows from new markets, including China (total visitors rose by 8.2% y/y in 2019). In 2020, the unprecedented contraction of the tourism and automotive sectors due to Covid-19 will be the main drivers of the recession.

Overall, Morocco also remains highly vulnerable to the agricultural sector’s volatility (15% of output and 20% of exports). During the 2019 drought, the industry recorded a strong contraction, underlining the need for further economic diversification.

In 2021, we expect Morocco’s economy to expand by +5% thanks to the normalization of cereal crops, resumption of infrastructure projects, expansion of the manufacturing sector and the gradual recovery of world demand and tourism activity. The central bank, which cut its policy rates from 2.25% to 2% in March 2020, is expected to follow an accommodative stance throughout the year.

 

The World Bank’s 2019 Doing Business survey ranks Morocco 53 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 unsuccessful admission process to the Economic Community of West African States (ECOWAS) shows the difficulties surrounding diversification of export 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.