Steady growth despite primary sector high volatility
The resilience of the Moroccan economy was remarkable during the last 20 years. This is a clear difference with the 1990’s 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 7 months) which is a key buffer.
The main source of growth volatility was domestic, namely the agricultural sector. It accounts for about 13% of GDP and staggering 40% of employment. The unpredictable and sometimes bad weather had a massive impact on crops. In 2016, the poor output cut overall GDP growth by -3pp. In 2017, good crops and output recovery to 2015-highs explain our +4.5% GDP growth forecast. 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 but more modest rate: 1.5-2% y/y over the last four years. Key successes aside (10% of Renault sales came from Morocco) growth is not broad-based. This quite poor performance points to the country’s difficulty to ramp up value chains outside some traditional sectors. Investment is strong (30% of GDP in 2016) but too concentrated on low productivity sectors such as housing.