Since 2017, Morocco’s growth rate has been oriented on the downside: From +4.2% in 2017, the economy should expand at a rate of only +2% in 2020.

On the demand side, consumer demand will remain muted though resilient, thanks to the reduction of inflationary pressures and supportive fiscal policy. A monetary policy status quo (policy interest rates at 2.25%) should prevail in the short term. However, Bank-al-Maghri’s policy should be supportive via targeted preferential refinancing conditions, which will benefit banks distributing credit to small and medium sized companies. The government’s spending is likely to remain constrained, as fiscal spending will be restrained in the context of the IMF Precautionary and Liquidity Arrangement (PPL) (fiscal deficit of 3.5%). As indicated in the 2020 finance bill, the government will focus on socio-economic aspects by investing in education, healthcare and infrastructure development. Public debt (65% of GDP in 2019) is not expected to diminish before 2021. 

In terms of external demand, Morocco will suffer from global trade disruptions in the context of the U.S. – China dispute and from the grimmer economic prospects for its main trading partners. The level of activity in the automotive sector has levelled off as a direct consequence of difficulties in the European car industry. 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. Globally challenging conditions for foreign direct investments will also put additional downward pressure on domestic growth. Conversely, the tourism industry continues to deliver positive results, thanks to inflows from new markets, including China (total visitors rose by 8.2% y/y in 2019). However, the coronavirus outbreak  has caused a significant negative shock on tourism acticities in the beginning of 2020, justifying a conservative outlook on growth.

 

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 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.