Morocco's Stalling Economy
In an article by Lachen Achy,Non-Resident Senior Associate at the Carnegie Endowment for Peace's Middle East Center, reviews the state of Morocco's economy . The article appeared first in Al-Monitor.
Source : https://www.marocafrik.com/english/Morocco-s-Stall...
Lahcen Achy observes that it took 3 months for the budget to be approved.Given the effects of the financial crisis regionally and internationally, this delay is not surprising.The beginning of 2012 saw the average oil price for a barrel of oil exceed $100.
Morocco imports more than 95 percent of its oil, and slow economic growth in Europe has negatively impacted Moroccan exports, tourism and remittances from the more than three million Moroccans working in Europe.
There has been a dramatic decline of perhaps 50 per cent in crops which has affected revenue and the salaries fot agricultural workers and increased Morocco's imports. Morocco's GDP growth is expected to drop to 2.5 per cent.
Despite the constitutional changes in Morocco the 2012 budget contains nothing new regarding government spending policy and is merely a continuation of previous budgets.The sole measure, promoted by the PJD is a tax on tobacco and alcohol and it is not clear. whether it is not clear whether this measure will increase revenue, reduce consumption or exacerbate smuggling and black-market activities.
He notes that in the coming months socail tensions may increase due to worsening financial, economic and social indicators and a perceived failure by the government to tackle corruption.
He quotes official statistics showing that during the first quarter of 2012 the number of unemployed people rose by 93,000. This represents an average unemployment rate of 14.4 percent in urban areas, up from less than 13.3 percent in 2011.
The government remains at odds with the trade unions who held a major demonstration in Casablanca on 27 May and with graduates claiming employment in the public sector.
The government's fiscal margin is expected to shrink due to its high spending more than half the funds allocated for the year were spent to subsidize fuel in the first four months of 2012.
General Affairs and Governance Minister Najib Boulif has announced a review of the subsidies system before the end of June .
He thinks It is likely that the government will reduce investment spending to reduce the budget deficit, which exceeded 7 percent of GDP in 2011. This may have a negative effect on economic growthand stands contrary to
former policy on strengthening infrastructure, education and health.
Private investment is also negative and in 2012 investment credits declined while the volume of bad loans went up indicating difficulties in meeting obligations and a rise in defaults.During its most recent meeting, held at the end of March, the board of the Central Bank lowered the benchmark interest rate by 25 basis points (from 3.25 percent to 3 percent). He expects the impact of this measure to be limited and points out that the Casablanca Stock Exchange dropt 11 points and transaction volumes declined 50 per cent causing an outcryamongst investors.
Morocco has always had a trade deficit and t exports less than half of what it imports.
This indicates low competivity and a failure of diversification policies.Morocco has been able to cover the deficit through tourism revenue and remittances but these as has been noted have declined. Given the cost of oil and food imports , it is becoming more difficult to cover the trade deficit. The Central Bank foreign currency reserves have dropped by 20 percent in one year, and can now cover no more than four months of imports.
Lahcen Achy concludes that the government needs to advance a new social contract, one that ensures stability and balances curre competitiveness, productive investmentnt requirements with future goals. It needs to move from a rent seeking economy to an economy based on competitiveness and productive investment and the lowering of administrative obstacles which hinder SMEs.This requires courage,realism and practical application. He cautions against making promises that it may not be possible to fulfil and thus cause serious
frustration when they are not met.
Morocco imports more than 95 percent of its oil, and slow economic growth in Europe has negatively impacted Moroccan exports, tourism and remittances from the more than three million Moroccans working in Europe.
There has been a dramatic decline of perhaps 50 per cent in crops which has affected revenue and the salaries fot agricultural workers and increased Morocco's imports. Morocco's GDP growth is expected to drop to 2.5 per cent.
Despite the constitutional changes in Morocco the 2012 budget contains nothing new regarding government spending policy and is merely a continuation of previous budgets.The sole measure, promoted by the PJD is a tax on tobacco and alcohol and it is not clear. whether it is not clear whether this measure will increase revenue, reduce consumption or exacerbate smuggling and black-market activities.
He notes that in the coming months socail tensions may increase due to worsening financial, economic and social indicators and a perceived failure by the government to tackle corruption.
He quotes official statistics showing that during the first quarter of 2012 the number of unemployed people rose by 93,000. This represents an average unemployment rate of 14.4 percent in urban areas, up from less than 13.3 percent in 2011.
The government remains at odds with the trade unions who held a major demonstration in Casablanca on 27 May and with graduates claiming employment in the public sector.
The government's fiscal margin is expected to shrink due to its high spending more than half the funds allocated for the year were spent to subsidize fuel in the first four months of 2012.
General Affairs and Governance Minister Najib Boulif has announced a review of the subsidies system before the end of June .
He thinks It is likely that the government will reduce investment spending to reduce the budget deficit, which exceeded 7 percent of GDP in 2011. This may have a negative effect on economic growthand stands contrary to
former policy on strengthening infrastructure, education and health.
Private investment is also negative and in 2012 investment credits declined while the volume of bad loans went up indicating difficulties in meeting obligations and a rise in defaults.During its most recent meeting, held at the end of March, the board of the Central Bank lowered the benchmark interest rate by 25 basis points (from 3.25 percent to 3 percent). He expects the impact of this measure to be limited and points out that the Casablanca Stock Exchange dropt 11 points and transaction volumes declined 50 per cent causing an outcryamongst investors.
Morocco has always had a trade deficit and t exports less than half of what it imports.
This indicates low competivity and a failure of diversification policies.Morocco has been able to cover the deficit through tourism revenue and remittances but these as has been noted have declined. Given the cost of oil and food imports , it is becoming more difficult to cover the trade deficit. The Central Bank foreign currency reserves have dropped by 20 percent in one year, and can now cover no more than four months of imports.
Lahcen Achy concludes that the government needs to advance a new social contract, one that ensures stability and balances curre competitiveness, productive investmentnt requirements with future goals. It needs to move from a rent seeking economy to an economy based on competitiveness and productive investment and the lowering of administrative obstacles which hinder SMEs.This requires courage,realism and practical application. He cautions against making promises that it may not be possible to fulfil and thus cause serious
frustration when they are not met.
Source : https://www.marocafrik.com/english/Morocco-s-Stall...