For the Moroccan economy, 2020 was especially tough: bringing not only Covid-19 but also drought. Now, though, a recovery is taking hold, underpinned by a strong vaccination programme and an agricultural rebound due to good rains.
Gross domestic product had contracted by 6.3 per cent in 2020 amid lockdown restrictions, the collapse of tourism and plummeting demand in Europe — the destination for much of Morocco’s manufacturing and agricultural exports.
However, after this rapid recession — the kingdom’s first since 1997 — the IMF expects the economy to grow by 4.5 per cent in 2021.
“So far, we are seeing a relatively strong recovery,” says James Swanston, economist at Capital Economics, a London-based consultancy — although he notes that travel disruption still weighs on the hospitality sector.
Agriculture is set to bounce back strongly. It accounts for 10 per cent of Morocco’s GDP, and provides livelihoods for around a third of the population, which means growth remains vulnerable to climate conditions, such as the droughts of 2020 and 2019. But good rains after those two dry years have led to projections that agricultural output would rise by 19 per cent this year, Swanston says — adding around 2.2 per cent to GDP growth.
Yet the pandemic also exposed weaknesses in the Moroccan economy, analysts say, from the vulnerability of tourism to the large number of people who live off the informal economy and have no protection against adverse events.
Ahmed Reda Chami, an economist and former minister who heads the Economic, Social and Environmental Council, a think-tank, notes that the state extended support to some 5.2m households during the pandemic whose breadwinners worked in informal businesses. The size of the informal sector, he says, “was the most obvious thing that hit us in the face”.
Another vulnerability, he adds, was the extent to which “small and medium companies are undercapitalised and rely on bank debts”.
The World Bank says poverty in the north African country deepened as a result of Covid-19, but state support to informal workers prevented even more hardship.
“After several years of declines, the poverty rate . . . is estimated to have increased from 5.8 per cent in 2019 to 7.1 per cent in 2020, an increase that could have been larger hadn’t it been for the government’s cash transfer programs,” according to the bank, which expects poverty to decline in 2021, but not to pre-pandemic levels.
Coronavirus led to the shuttering of many small companies while larger groups were left scarred. Businessmen and analysts, however, credit the authorities with acting fast to contain the damage.
Moody’s, the rating agency, in an April note, described the government’s response to the health crisis as “swift and comprehensive” and said it positioned “the economy well to grow when international demand recovers”.
Some 51 per cent of Moroccans were fully vaccinated at the end of September under an efficient national campaign, the success of which has been attributed to the determination of Mohammed VI, the monarch, to ensure speedy vaccine coverage and minimise damage to the fragile economy.
The authorities also launched measures aimed at ensuring the survival of businesses, including reducing interest rates, deferring taxes and providing credit lines to those in difficulty.
“We had a very advantageous restructuring of our bank debts at a lower rate and with longer maturity,” says Karim Tazi, a businessman, who heads Richbond, an industrial group that employs 3,000 people. “We were also able to reschedule taxes and all social security.”
“What also really helped was that our outstanding bills to public sector companies were paid,” he adds. “Usually, they take years to settle but, during Covid, they paid — which gave us a breath of oxygen.”
With the worst of the impact of coronavirus believed to be over, Tazi says his company is now “working at a level comparable to 2019, month by month, in terms of turnover”.
Before the pandemic, the contribution of manufacturing to the economy had risen to 15 per cent — the result of state efforts to increase higher-value exports, especially in the automotive sector.
Morocco worked hard to insert itself into global supply chains, with big investments from the likes of France’s Renault and Peugeot PSA. Car exports dipped in 2020 but rose again by 25 per cent to $5.76bn in the first eight months of 2021, according to the Office des Changes, which publishes trade statistics.
The government-backed direct and indirect measures to support the economy have together amounted to 6.3 per cent of GDP, “one of the larger economic support packages in the region”, according to Capital Economics. This has widened the budget deficit to 7.7 per cent of GDP, however — the highest level in 30 years. Public debt has also jumped to 76 per cent of GDP.
As a result, the consultancy expects that, in the near term, “fiscal austerity will hold back the economic recovery”.
With a new government elected in September, led by Aziz Akhannouch, a billionaire businessman, analysts are waiting to see if the new administration will implement the recommendations of a much-touted report on economic development commissioned by the king and made public earlier this year.
A former agriculture minister since 2007, Akhannouch was chair and chief executive officer of Akwa, a Moroccan conglomerate that works primarily in energy but has interests in other sectors.
After the election, Akhannouch announced that he was withdrawing from all management of his family businesses. He is also the president of the National Rally for Independents, a party close to the palace that won the largest number of seats in the election and includes many businessmen.
Drafted by a commission of high-profile business leaders, economists, academics and civil society leaders after extensive consultation with citizens, the economic report proposes a blueprint for “a new development model” based on “objectives that are ambitious yet realistic”.
These include doubling GDP per capita by 2035, investing in human capital by improving healthcare provision and educational attainment, and bringing down the informal employment rate to 20 per cent.
The report identifies current systemic weaknesses that it says hold back the country, such as the absence of strategic vision and “judicial insecurity and unpredictability”.
It makes recommendations to modernise the economy and open it up to entrepreneurs by reducing bureaucracy, and addressing unfair competition and other barriers to entry.
Some, however, are worried that strengthening competition might not be a priority for the Akhannouch government. Tazi, who was on the commission that drafted the report, says that the new prime minister did not mention the report while campaigning.
But Chami, also a member of the commission, says the report had royal backing and as such it would not be neglected.
“The most dramatic outcome that can happen is that they move ahead without taking into account the recommendations of the report. However, I believe that the king mentioning it publicly on two occasions and asking stakeholders to embrace it, makes it unlikely any future government would discard it.”
Source: Economy - ft.com
