economy

The economy of Morocco is considered a relatively liberal economy governed by the law of supply and demand. Since 1993, Morocco has followed a policy of privatization of certain economic sectors which used to be in the hands of the government.[10] Morocco has become a major player in the African economic affairs,[11]and is the 5th African economy by GDP (PPP). The World Economic Forum placed Morocco as the 1st most competitive economy in North Africa, in its African Competitiveness Report 2014-2015.[12]

The services sector accounts for just over half of GDP and industry, made up of mining, construction and manufacturing, is an additional quarter. The sectors who recorded the highest growth are the tourism, telecoms and textile sectors. Morocco, however, still depends to an inordinate degree on agriculture. The sector accounts for only around 14% of GDP but employs 40–45% of the Moroccan population. With a semi-arid climate, it is difficult to assure good rainfall and Morocco’s GDP varies depending on the weather. Fiscal prudence has allowed for consolidation, with both the budget deficit and debt falling as a percentage of GDP.

The economic system of the country presents several facets. It is characterized by a large opening towards the outside world. France remains the primary trade partner (supplier and customer) of Morocco. France is also the primary creditor and foreign investor in Morocco. In the Arab world, Morocco has the second-largest non-oil GDP, behind Egypt, as of 2005.

Since the early 1980s, the Moroccan government has pursued an economic program toward accelerating real economy growth with the support of the International Monetary Fund, the World Bank, and the Paris Club of creditors. The country’s currency, the dirham, is now fully convertible for current account transactions; reforms of the financial sector have been implemented; and state enterprises are being privatized.

The major resources of the Moroccan economy are agriculture, phosphates, and tourism. Sales of fish and seafood are important as well. Industry and mining contribute about one-third of the annual GDP. Morocco is the world’s third-largest producer of phosphates (after the United States and China), and the price fluctuations of phosphates on the international market greatly influence Morocco’s economy. Tourism and workers’ remittanceshave played a critical role since independence. The production of textiles and clothing is part of a growing manufacturing sector that accounted for approximately 34% of total exports in 2002, employing 40% of the industrial workforce. The government wishes to increase textile and clothing exports from $1.27 billion in 2001 to $3.29 billion in 2010.

The high cost of imports, especially of petroleum imports, is a major problem. Morocco suffers both from structural unemployment and a large external debt.

YearGross Domestic ProductUS Dollar ExchangeInflation Index
(2000=100)
Per Capita Income
(as % of USA)
198074,0903.93 Dirhams 338.87
1985129,50710.06 Dirhams573.72
1990212,8198.24 Dirhams675.17
1995281,7028.54 Dirhams915.03
2000354,20810.62 Dirhams1003.73
2005460,8558.86 Dirhams1074.68
2006503,7148.72 Dirhams72

For purchasing power parity comparisons, the U.S. Dollar is exchanged at over 8 Dirhams. Mean wages were $2.88 per man-hour in 2009.




Economic History (1960–recent)


1960–1989

Morocco instituted a series of development plans to modernize the economy and increase production during the 1960s. Net investment under the five-year plan for 1960–64 was about $1.3 billion. The plan called for a growth rate of 6.2%, but by 1964 the growth rate had only reached only 3%. The main emphasis of the plan was on the development and modernization of the agricultural sector. The five-year development plan for 1968–72 called for increased agriculture and irrigation. The development of the tourist industry also figured prominently in the plan. The objective was to attain an annual 5% growth rate in GDP; the real growth rate actually exceeded 6%.

Investment during the 1970s included industry and tourism development. The five-year plan for 1973–77 envisaged a real economic growth of 7.5% annually. Industries singled out for development included chemicals (especially phosphoric acid), phosphate production, paper products, and metal fabrication. In 1975, King Hassan II announced a 50% increase in investment targets to allow for the effects of inflation. The 1978–80 plan was one of stabilization and retrenchment, designed to improve Morocco’s balance-of payments position.

The ambitious five-year plan for 1981–85, estimated to cost more than $18 billion, aimed at achieving a growth rate of 6.5% annually. The plan’s principal priority was to create some 900,000 new jobs and to train managers and workers in modern agricultural and industrial techniques. Other major goals were to increase production in agriculture and fisheries to make the country self-sufficient in food, and to develop energy, industry, and tourism to enable Morocco to lessen its dependence on foreign loans. The plan called for significant expansion of irrigated land, for increased public works projects such as hospitals and schools, and for economic decentralization and regional development through the construction of 25 new industrial parks outside the crowded CasablancaKénitra coastal area. Large industrial projects included phosphoric acid plants, sugar refineries, mines to exploit cobalt, coal, silver, lead, and copper deposits, and oil-shale development.

1990–2000s

Moroccan economic policies brought macroeconomic stability to the country in the early 1990s but did not spur growth sufficient to reduce unemployment despite Moroccan Government’s ongoing efforts to diversify the economy.[17]Drought conditions depressed activity in the key agricultural sector, and contributed to an economic slowdown in 1999. Favourable rainfalls have led Morocco to a growth of 6% for 2000. Formidable long-term challenges included: servicing the external debt; preparing the economy for freer tradewith the EU; and improving education and attracting foreign investment to improve living standards and job prospects for Morocco’s youthful population.

Macroeconomic stability coupled with relatively slow economic growthcharacterized the Moroccan economy over the period 2000–2005. The government introduced a number of important economic reforms in that period. The economy, however, remained overly dependent on the agricultural sector. Morocco’s primary economic challenge was to accelerate growth in order to reduce high levels of unemployment. The government continued liberalizing the telecommunications sector in 2002, as well as the rules for oil and gas exploration. This process started with the sale of a second GSM license in 1999. The government in 2003 was using revenue from privatizations to finance increased spending. Although Morocco’s economy grew in the early 2000s, it was not enough to significantly reduce poverty.[16]

Through a foreign exchange rate anchor and well-managed monetary policy, Morocco held inflation rates to industrial country levels over the past decade. Inflation in 2000 and 2001 were below 2%. Despite criticism among exporters that the dirham has become badly overvalued, the current account deficit remains modest. Foreign exchange reserves were strong, with more than $7 billion in reserves at the end of 2001. The combination of strong foreign exchange reserves and active external debt management gave Morocco the capacity to service its debt. Current external debt stands at about $16.6 billion. [2]

Economic growth, however, has been erratic and relatively slow, partially as a result of an over-reliance on the agricultural sector. Agriculture production is extremely susceptible to rainfall levels and ranges from 13% to 20% of GDP. Given that 36% of Morocco’spopulation depends directly on agriculture production, droughts have a severe knock-on effect to the economy. Two successive years of drought led to a 1% incline in real GDP in 1999 and stagnation in 2000. Better rains during the 2000 to 2001 growing season led to an 6.5% growth rate in 2001. Growth in 2006 went above 9%, this was achieved by a booming real estate market. Over the long term, Morocco will have to diversify its economy away from [agriculture] to develop a more stable economic basis for growth.

The government introduced a series of structural reforms in recent years. The most promising reforms have been in the liberalization of the telecommunications sector. In 2001, the process continued with the privatization of 35% of the state operator Maroc Telecom. Morocco announced plans to sell two fixed licenses in 2002. Morocco also has liberalized rules for oil and gas exploration and has granted concessions for many public services in major cities. The tender process in Morocco is becoming increasingly transparent. Many believe, however, that the process of economic reform must be accelerated in order to reduce urban unemployment below the current rates above 20%.

Recent developments

Morocco’s sound economic management in recent years has yielded strong growth and investment grade status and it is weathering the negative impacts of the global crisis impressively well. Morocco is now addressing persistent social problems by reducing absolute poverty rates, investing in human capital through quality education, expanding access to drinking water, and linking rural areas to markets through investment in roads.

Morocco faces challenges on human development outcomes despite progress over the past decade, in particular. Overall illiteracy rates and gender disparity in access to secondary education remain high and the country continues to suffer poor outcomes on infant and maternal mortality. It also needs to diversify its economy, become more competitive, and integrate further into the global economy if it is to reach higher growth levels.

The government has recognized this challenge and has put in place an ambitious process of legal, policy, and institutional modernization that has far-reaching political, economic, and social dimensions. It has designed and is now implementing a comprehensive set of new sector strategies that respond to the overall national vision and that target development challenges with clear, measurable goals and indicators.

Tough government reforms and steady yearly growth in the region of 4–5% from 2000 to 2007, including 4.9% year-on-year growth in 2003–2007 the Moroccan economy is much more robust than just a few years ago.[citation needed] Economic growth is far more diversified, with new service and industrial poles, like Casablanca andTangier, developing. The agriculture sector is being rehabilitated, which in combination with good rainfalls led to a growth of over 20% in 2009.

2008

In a statement, released on July 2008, the IMF called Morocco “a pillar of development in the region” and congratulated King Mohammed VI and the Central Bank on Morocco’s continued strong economic progress and effective management of monetary policy.[18]

Morocco’s economy is expected to grow by 6.5% in 2008, according to the Moroccan finance minister. While the forecast is slightly lower than the earlier 6.8% projected growth it still remains quite an achievement considering the circumstances. GDP growth in 2007 was only 2.2% due to a poor harvest caused by prolonged periods of drought; Morocco experienced nonagricultural GDP growth of 6.6 percent in 2007. Inflation is expected to reach 2.9% in 2008 due to the rising costs of energy.[19] In an increasingly challenging global economic climate, the IMF expects continued nonagricultural expansion of the Moroccan economy.

The global financial crisis affected the Moroccan economy in only a limited way. Morocco may be affected, by the slowdown of international economy, stirred by the global financial crisis, and whose maximum impact on national economy could decrease the GDP growth rate by at least one point in 2009, according to the Bank Al-Maghrib[20]

In a report issued on July 2008, the IMF noted that Morocco’s financial sector is sound and resilient to shocks, and that the remarkable fiscal consolidation efforts of recent years have allowed the Moroccan economy to absorb the impact of difficult international economic conditions and increasing global prices for essential commodities such as petroleum and energy. International economic experts recognize that Morocco’s exemplary economic performance is beneficial not only to Moroccans, but also for the nearly 90 million people who live the Maghreb.

Morocco is expected to close the year 2008 with a budgetary surplus ranging between MAD 3 billion and MAD3.5 billion ($348 million to $407 million),[21] despite a difficult international context marked by a severe economic crisis. At the end of November 2008, the state’s budget registered a surplus of MAD 3.2 billion ($372 million), while at the end of November 2009, the budgetary surplus is projected at MAD 6.9 billion ($803 million).[21]

The diversification of the Economy includes a multi-disciplinary approach to the development of non-agricultural sector, including the creation of special sectorial zones in industry, tourism and services outsourcing. In addition, reforms to the higher educational system and business law are also planified in the new program-contract signed in 2009 between the government, the banking sector and some zone-development companies. The approach also include a better sustaining of small-business development and prospection of external markets. The objective is to become an emerging industrial country of the likes of Vietnam by 2015.

US Ambassador to the EU noted that:

“Morocco stands out as a model of economic reform for the region and for other developing countries. The kind of economic progress that Morocco has made, and which the rest of the Maghreb has the potential to accomplish, is the best antidote to the new threat of terrorism in the region.”[citation needed]
Moroccan GDP growth compared to region (IMF)2006200720082009
Maghreb GDP growth4.34.35.54.9
Moroccan GDP growth7.82.76.55.5
Algerian GDP growth2.04.64.94.5
Tunisian GDP growth5.56.35.55.0

2009

The economy has remained insulated from the worst effects of the world crisis. Due in part to the rebounding of the agricultural sector, which had suffered from a 2007 drought, the economy expanded 5.6% in 2008, with 5.7% growth forecasted for 2009. Morocco’s economy is the 61st largest in the world, according to the IMF, though its per-capita GDP is low compared to similarly ranked nations. King Mohammed VI has recently launched two national economic strategies: Plan Maroc Vert and Plan Emergence. The first seeks to create 1.5m jobs in the agriculture sector, and add around €7.65 billion to GDP through €10.8 billion of investments by 2020, while the latter will establish new industrial zones and boost training to increase efficiency. Additionally, phosphates production, which accounted for more than a third of 2008 exports, is being restructured for greater value.

Morocco’s economy is expected to achieve a 6.6% growth in the first quarter of 2009 up from 4.8% in the past quarter thanks to prospects for an agricultural campaign above the average of the past five years.[23][24]

By the end of December 2008, rainfalls exceeded that of an ordinary year by 106%. This surplus has benefited to all agricultural regions and increased the water stored in dams destined for agriculture to 40.7%. In these conditions and taking into consideration a cereal campaign nearing 70 million quintals, the agricultural value added could increase by 22.2% in the first quarter of 2009, thus contributing 2.9% to the national economic growth.[23][24]

Due to a decrease of activity among Morocco’s main commercial partners, foreign demand of goods destined towards Morocco would moderately slow down in 2009 compared to the 9% rise in 2008. This trend could continue in Q1 of 2009 with a growth rate not exceeding 2% due to a lackluster economic growth outlook and the slowdown of international trade.




Agriculture


Agriculture employs about 40% of Morocco’s workforce. In the rainy sections of the northeast, barley, wheat, and other cereals can be raised without irrigation. On the Atlantic coast, where there are extensive plains, olives, citrus fruits, and wine grapes are grown, largely with water supplied by artesian wells. Morocco also produces a significant amount of illicit hashish, much of which is shipped to Western Europe. Livestock are raised and forests yield cork, cabinet wood, and building materials. Part of the maritime population fishes for its livelihood. Agadir, Essaouira, El Jadida, and Larache are among the important fishing harbors.

land

Morocco is endowed with numerous exploitable resources. With approximately 33,000 square miles (85,000 km2) of arable land (one-seventh of which can be irrigated) and its generally temperate Mediterranean climate, Morocco’s agricultural potential is matched by few other Arab or African countries. It is one of the few Arab countries that has the potential to achieve self-sufficiency in food production. In a normal year, Morocco produces two-thirds of the grains (chiefly wheat, barley, and corn [maize]) needed for domestic consumption.

Morocco exports citrus fruits and early vegetables to the European market. Its wine industry is developed, and the production of commercial crops (cotton, sugarcane, sugar beets, and sunflowers) is expanding. Newer crops such as tea, tobacco, and soybeans have passed the experimental stage, the fertile Gharb plain being favourable for their cultivation. Morocco is actively developing its irrigation potential that ultimately will irrigate more than 2.5 million acres (1 million hectares).

Drought

Unreliable rainfall is a chronic problem that produces drought or sudden floods. In 1995, Morocco’s worst drought in 30 years forced Morocco to import grain and adversely affected the economy. Another drought occurred in 1997, and one in 1999–2000. Reduced incomes due to drought caused GDP to fall by 7.6% in 1995, by 2.3% in 1997, and by 1.5% in 1999. During the years between drought, good rains brought bumper crops to market. Good rainfall in 2001 led to a 5% GDP growth rate.

The danger of drought is ever present and still dramatically affects the Moroccan economy, even though Moroccan decisionmakers have recently[when?] stated that the economy becomes more diversified and deconnected from rain falls.[citation needed] Especially, cereal yields still depend on considerable variation in annual precipitation. Cereals constitute the essential of the agricultural value added and their production is very sensitive to rain falls. More important is that cereal yields determine not only the aggregate value added in the agricultural sector but also economic growth in general.[citation needed] According to the Moroccan economist, Brahim MANSOURI (Fiscal Policy and Economic Growth: Egypt, Morocco and Tunisia Compared, UNECA, 2008), when drought, measured as a dummy variable computed on the basis of the rate of growth of cereal yield, endangers extremely, the growth rate of real GDP would fall by 10 percent

Fishing

The fishing industry in Morocco is a leading foreign exchange earner, accounting for 56% of agricultural and 16% of total exports. For a long time the industry has been an economic pillar for the country.[34] The Kingdom is considered the largest fish market in Africa, with an estimated total catch of 1,084,638 MT in 2001.