Morocco:  Growth is heading south

Morocco: Growth is heading south

Trade openness is not the best bargain in 2019, since world trade in goods already experienced three quarters of contraction and Morocco is no exception. GDP growth came in at +2.5% in Q2 and net exports made a -0.9pp contribution, since export growth came to a sudden stop. This growth performance was also the weakest since Q4 2016. At the same time, agricultural output was impacted by lower crops (-2.8% y/y in Q2). In contrast, non-agricultural output grew by +3.3% y/y, mainly driven by water and electricity output (+20.9% y/y in Q2). Without the exceptional performance in that sector, the latest GDP growth rate would rather have been about +2% y/y; and this is also our growth forecast for H2 2019, since short-term indicators such as car sales are still oriented to the downside (about -10% y/y in August). Low economic growth combined with the increase in days sales outstanding just before the growth slowdown (+3 days to 84 days in 2018) suggests that corporate insolvencies are likely to rise (we forecast +7% in 2019).