IMF statement on Morocco

The Executive Board of the IMF approved a 24-month arrangement under the PLL in an amount equivalent to SDR 4.1 billion (about US$6.2 billion, 700 percent of quota) in August 2012. During its stay, the mission also met with representatives of the private sector and civil society.

Mr Dauphin said ina statement that Morocco’s sound economic fundamentals and overall strong record of policy implementation have contributed, over the years, to a solid macroeconomic performance. This helped Morocco qualify for the PLL which will help to cushion the economy against external shocks. Morocco has suffered because of Europe's ongoing economic crisis as it is Morocco's main market.This year Morocco has also had to face a reduced crop due to adverse climatic conditions and high oil and food prices.

GDP growth is expected to slow to about 3 percent in 2012, although the non-agriculture growth is expected to remain robust at 4.5 percent. The current account deficit is expected to exceed 8 percent of GDP, even though international reserves have stabilized at around 4 months of imports. The successful sovereign bond issuance in December in the amount of US$1.5 billion—of which a third has a 30-year maturity—has confirmed market confidence. The fiscal deficit should decline to about 6 percent of GDP due in part to the adjustment in the prices of subsidized products in June. Inflation is projected to remain low at 1.3 percent in 2012, despite these price increases. Unemployment is stable around 9 percent, and remains especially high among the youth, Mr Dauphin noted.

External pressures were expected to continue and an additional deterioration of the international environment cannot be excluded. The PLL arrangement builds on structural measures to increase competitiveness, potential growth and employment, fiscal consolidation, and prudent monetary and financial policies. However, he noted that implementing the needed reforms has become increasingly urgent if Morocco is to preserve its performance in the face of a challenging external environment.

Despite Morocco's progress in strengthening growth and reducing poverty over the past decade, much remains to be done to reduce unemployment, in particular among the youth, and further improve social indicators such as the literacy rate and equal access to basic infrastructure, health services and education, he emphasised.

In this context, structural measures to promote higher and more inclusive growth, through product and labour market reforms, investment in human and physical capital, and improvement of the business climate are needed, he said. There was a need forstructural fiscal reforms which wouldl also create the fiscal space for improved social protection and higher investment in human capital and infrastructure. He emphasised that reform of the subsidy system was crucial as the current situation was a drain on the budget and an ineffective those really in need. Pension reform is also a priority to ensure the system's viability and fiscal sustainability.

In a difficult external environment, improving competitiveness is, he said, a necessity. To fully reap the benefit of the authorities’ efforts to increase export market and product diversification and attract further foreign direct investment, structural reforms to improve the business climate and investment in education and training are necessary. A more flexible exchange rate system would strengthen the contribution of structural reforms to greater competitiveness and absorption of external shocks.

Mr Dauphin said that the  Moroccan banking sector has been resilient to the global crisis and remained sound overall. The IMF supported Bank Al-Maghrib’s efforts to continue to strengthen banking regulation and supervision,through gradual adherence to Basel III standards.Continuing efforts to foster  wider access to credit, especially in rural areas, and strengthening  intermediation, particularly for small and medium enterprises,would
contribute to higher and more inclusive growth, he concluded.