Moroccan Government Upbeat about 2014 Economic Performance

The Moroccan government has had many battles to wage on the economic front, and the Premiership of Benkirane was at risk because of it. Weak finances, decreasing exports to traditional markets, a roller coaster phosphate market, and a series of shortcomings promised to bring bad news for Morocco this year.

But Prime Minister Benkirane is not a man who gives up easily in light of bad news. In recent proclamations, Benkirane and members of his government have been insisting that 2014 will be a good year after all. They argue that despite a smaller GDP growth anticipated for the year, largely due to weak cereal harvest, the Moroccan economy is expected to recover.[membersonly]

Indeed, on the economic front, growth expectation has recently been reduced by almost a point to settle at 3.5%. This figure reduces the forecasting gap with those of the IMF, the World Bank and Morocco’s own planning commission (HCP), yet the latter does not even see any growth above 3%.

Such reduced growth expectation is largely tied to the expected fall in cereal harvest. Agricultural forecasters say that cereal production will fall by nearly 31% this year compared to last, with output of 67.3 million quintals expected. This is a major drop in agricultural performance likely to affect the entire economy. But growth outside of agriculture is expected to help cushion the fall. So much so that the budget deficit for the first half of this year (MAD 29 billion) was smaller than that of last year’s first half period (MAD 32.8 billion). Benkirane’s government predicts that the budget deficit by the end of this year should account for 4.9% of GDP, versus 5.5% last year.

Among the drivers of positive expectations is the tourism sector, which saw revenues increase by 3.6% in 1H14, to settle at nearly MAD 26 billion. This value extracted from tourism enable the offsetting of the trade deficit by 52% as of June 2014. Tax revenues expanded by 4.8%, while the sale of Vivendi’s stake in Maroc Telecom fetched the State of Morocco some MAD 1.4 billion. Furthermore, and remaining on the positive front, export figures rose by 7.4% to MAD 101 billion during the first six months of the year. All while imports grew at a more moderate pace of 4.7%.

The country’s foreign currency reserves stood at the equivalent of MAD 20 billion, which would enable Morocco to cover its imports during a period of 5 months.

Among the most noteworthy news in the available data is that the automobile sector is now Morocco’s first source of export revenues, surpassing phosphates and fertilizers. That’s because output and export rose in the auto sector, while output and export contracted in the phosphate sector.

On the negative front, it remains unclear how Morocco will really achieve its target growth rate of 3.5%. Already the tourism sector is facing headwinds from global geopolitical events that could impact its numbers. The recent warnings from the French and British governments for their nationals traveling to Morocco may not have had an immediate impact, but all it takes is a single event to derail the tourism sector growth trajectory.

In the financial sector, while the released figures seem to be appeasing, the recent financial donation to Morocco by Qatar and the newest loans coming from Europe hint on finances that remain fragile.[/membersonly]

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