For the Moroccan economy, 2020 has been particularly difficult: with not only the Covid-19 but also the drought. Now, however, a recovery is taking hold, supported by a strong vaccination program and an agricultural rebound due to good rains.
Gross domestic product had contracted 6.3% in 2020 due to foreclosure restrictions, collapsing tourism and falling demand in Europe – the destination of a large chunk of manufacturing and agricultural exports from Morocco.
However, after this rapid recession – the kingdom’s first since 1997 – the IMF expects the economy to grow 4.5% in 2021.
“So far we are seeing a relatively strong recovery,” said James Swanston, economist at Capital Economics, a London-based consultancy – although he notes that travel disruptions are still weighing on the travel industry. ‘hotel.
Agriculture is expected to rebound strongly. It accounts for 10 percent of Morocco’s GDP and provides livelihoods for around a third of the population, meaning growth remains vulnerable to climatic conditions, such as the droughts of 2020 and 2019. But good rains after these two dry years have led to projections that agricultural production will increase by 19 percent this year, Swanston says, adding about 2.2 percent to GDP growth.
Yet the pandemic has also exposed the weaknesses of the Moroccan economy, analysts say, from the vulnerability of tourism to the large number of people who live in 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 has extended support to some 5.2 million households during the pandemic whose breadwinners were working 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-sized enterprises are under-capitalized and dependent on bank debt.”
The World Bank says poverty in the North African country has worsened in the wake of Covid-19, but state support for informal workers has helped avert even more hardship.
“After several years of decline, the poverty rate. . . It is estimated to have risen from 5.8% in 2019 to 7.1% in 2020, an increase that could have been greater without the government’s cash transfer programs, ”according to the bank, which expects poverty will decline in 2021, but not to pre-pandemic levels.
The coronavirus has caused many small businesses to shut down while larger groups have been branded. Businessmen and analysts, however, give the authorities credit for acting quickly to contain the damage.
Moody’s, the rating agency, in an April memo called the government’s response to the health crisis “rapid and comprehensive” and said it was positioning “the economy well to grow when international demand hits. will straighten out “.
Some 51% of Moroccans were fully immunized by the end of September as part of an effective national campaign, the success of which has been attributed to the determination of Mohammed VI, the monarch, to ensure rapid vaccination coverage and to minimize damage to the fragile economy.
The authorities have also launched measures to ensure the survival of businesses, including reducing interest rates, deferring taxes and providing lines of credit to people in difficulty.
“We had a very advantageous restructuring of our bank debts at a lower rate and with a longer maturity”, explains Karim Tazi, a businessman, who heads Richbond, an industrial group which employs 3,000 people. “We were also able to reschedule taxes and all social security.”
“What also really helped was that our unpaid bills to public sector companies were paid,” he adds. “Usually they take years to settle in but, during Covid, they paid off – which gave us a breath of fresh air.”
With the worst of the impact of the coronavirus supposed to be over, Tazi says his company “is now working at a level comparable to 2019, month by month, in terms of revenue.”
Before the pandemic, manufacturing industry’s contribution to the economy had grown to 15% – the result of state efforts to increase higher value-added exports, especially in the automotive sector.
Morocco has worked hard to enter global supply chains, with large investments from French Renault and Peugeot PSA. Car exports fell in 2020 but rose 25% again to $ 5.76 billion in the first eight months of 2021, according to the Office des Changes, which publishes trade statistics.
Government-backed direct and indirect measures to support the economy totaled 6.3 percent of GDP, “one of the region’s largest economic support programs,” according to Capital Economics. This, however, widened the budget deficit to 7.7 percent of GDP, the highest level in 30 years. Public debt also jumped to 76 percent of GDP.
As a result, the consulting firm expects that in the short term, “fiscal austerity will hamper economic recovery”.
With a new government elected in September, led by billionaire businessman Aziz Akhannouch, analysts are waiting to see if the new administration will implement the recommendations of a much-vaunted report on economic development commissioned by the king and delivered. public earlier this year.
Former Minister of Agriculture since 2007, Akhannouch was Chairman and CEO 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 president of the National Rally of Independents, a party close to the palace which won the most seats in the elections and which brings together many businessmen.
Written by a commission of business leaders, economists, academics and high-level civil society leaders after a broad consultation with citizens, the economic report proposes a blueprint for “a new development model” based on on “ambitious but realistic goals”.
These include doubling the GDP per capita by 2035, investing in human capital by improving health care and education levels, and reducing the informal employment rate to 20%.
The report identifies current systemic weaknesses that it says are holding back the country, such as the lack of strategic vision and “judicial insecurity and unpredictability.”
It makes recommendations to modernize the economy and open it up to entrepreneurs by reducing bureaucracy and tackling unfair competition and other barriers to entry.
Some, however, fear that strengthening competition is not a priority for the Akhannouch government. Tazi, who was on the commission that wrote the report, said the new prime minister did not mention the report during his campaign.
But Chami, also a member of the commission, said the report had royal support and as such would not be overlooked.
“The most dramatic result that can happen is that they move forward without taking into account the recommendations of the report. However, I think with the King mentioning it publicly twice and asking stakeholders to pass it, it is unlikely that a future government will reject it. “