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Morocco Country Risk Report Q4 2016

  • August 2016
  • -
  • Business Monitor International
  • -
  • 43 pages

Core Views


Despite not possessing hydrocarbon wealth, the Moroccan economywill remain a relative outperformer in North Africa over the mediumterm. Investors are increasingly expressing interest in the countryas an export-oriented manufacturing hub for the European marketand to West Africa. It also is relatively secure compared with the restof the Middle East and North Africa region, which will bode well forMorocco's underlying growth momentum in the next few years. Theall-important agricultural sector will nevertheless remain exposed tounpredictable weather patterns, resulting in significant volatility inheadline growth.Morocco's foreign policy will remain stable, with the governmentseeking to strengthen relationships with the EU and the Gulf CooperationCouncil, and looking to West Africa for trade and investmentopportunities. The Western Sahara issue will remain at the forefrontof Rabat's foreign policy agenda, and we do not see any significantprogress taking place on this issue in the near future.While a lower-than-average harvest will impact headline growth in2016 directly and indirectly through private consumption, we neverthelessmaintain a positive outlook for improvements in the externalsector, as the country will continue to attract a lot of interest fromforeign investors. We forecast real GDP growth of 0.7% in 2016,well below the 4.5% estimated for 2015.The gradual coming on stream of new energy sources over the nextfive years – as part of the National Energy Plan 2020 – will reducepressure on Morocco's current account and boost the country'sattractiveness for foreign investors. This structural evolution willbenefit the country's economic growth over the next decade.Average annual inflation in Morocco will remain around 1.5% over2016, similar to the 2015 level, as rising food prices from a weakerthan-expected harvest are mitigated by a decrease in householddemand.

Table Of Contents

Morocco Country Risk Report Q4 2016
Executive Summary.. 5
Core Views...5
Key Risks 5
Chapter 1: Economic Outlook.. 7
SWOT Analysis... 7
BMI Economic Risk Index.. 7
Economic Growth Outlook 8
Slowdown Temporary; Structural Impediments To Economic Boom8
Morocco's outlook remains positive despite a slump in growth in 2016, as exports and services will continue growing at a relatively fast
pace. A boom in non-primary sector growth is nonetheless off the cards given that SMEs will continue to struggle to access credit and
that tourism growth will remain subdued. We forecast real GDP growth to slow from 4.5% in 2015 to 0.7% in 2016 before picking up to
3.3% in 2017 as primary sector growth turns positive again.
GDP By Expenditure Outlook 9
TABLE: GDP GROWTH FORECASTS10
TABLE: PRIVATE CONSUMPTION FORECASTS..10
TABLE: GOVERNMENT CONSUMPTION FORECASTS...10
TABLE: FIXED INVESTMENT FORECASTS..10
TABLE: NET EXPORTS FORECASTS ...11
Fiscal Policy And Public Debt Outlook.. 11
Fiscal Improvements To Continue...11
Morocco's fiscal outlook will continue to improve over the coming quarters as the government pushes ahead with fiscal consolidation.
In addition, the two-year EUR3.2bn arrangement with the IMF under the precautionary and liquidity line framework, signed in July, will
increase Morocco's resilience to external crises.
Structural Fiscal Position 12
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES.13
TABLE: FISCAL AND PUBLIC DEBT FORECASTS ..13
External Trade And Investment Outlook 14
Current Account Deficit Widening Again From 2017.14
Morocco's current account deficit will continue to narrow in 2016 given the decline in oil prices. From 2017, higher oil prices will increase
the current account deficit again, albeit at a very slow pace. The country's external balance is not at risk, and foreign reserves will
continue growing on the back of large foreign investment inflows.
TABLE: AUTOS PRODUCTION INVESTMENT..15
TABLE: SELECTED APPROVAL ROUNDS OF THE INTER-MINISTERIAL COMMISSION FOR INVESTMENT. 15
Outlook On External Position.. 16
TABLE: CAPITAL and FINANCIAL ACCOUNT BALANCE.16
TABLE: CURRENT ACCOUNT BALANCE FORECASTS...16
TABLE: BREAKDOWN OF IMPORTS 17
TABLE: BREAKDOWN OF EXPORTS ...17
Monetary Policy 18
Low Rates Coming To An End.18
Bank al-Maghrib will keep its policy rate at 2.25% until the end of 2016 to support ailing economic activity. In 2017, BAM will begin
gradually raising interest rates owing to an uptick in real GDP growth, Fed hikes and the fact that credit growth is unlikely to be
negatively impacted.
Monetary Policy Framework 19
TABLE: MONETARY POLICY FORECASTS..19
Chapter 2: 10-Year Forecast... 21
The Moroccan Economy To 2025... 21
Diversified Economic Base Underpins Bright Future21
An increasingly diversified economic base, an attractive geographical position and strong investments in tourism and energy
infrastructure are major positives underpinning Morocco's long-term growth trajectory. Nevertheless, we caution that several issues,
such as persistently high unemployment and poverty combined with shortcomings in the quality of education, if not addressed properly,
could pose serious threats to our positive long-term view.
TABLE: LONG-TERM MACROECONOMIC FORECASTS.21
Chapter 3: Political Outlook... 25
SWOT Analysis. 25
BMI Political Risk Index... 25
Domestic Politics 26
Rejoining AU: Influence To Increase, Western Sahara Stalemate To Continue..26
By rejoining the African Union, Morocco aims to increase its diplomatic reach on the continent. This marks a radical shift from the emptyseat
strategy Morocco had adopted since 1984. Rabat will use its newly found lobbying power to push forward its view on Western
Sahara and increase its economic influence in Sub-Saharan Africa.
TABLE: POLITICAL OVERVIEW.26
TABLE: MOROCCO AND WESTERN SAHARA - FOREIGN POLICY TIMELINE.27
Long-Term Political Outlook... 28
Challenges For The Coming Decade: Scenarios For Change..28
The ongoing political and economic reforms undertaken by the government in recent years underpin our view that Morocco possesses
one of the most stable political climates in the region. However, high economic disparities in the country and high levels of corruption
could lead to social unrest of the type that spread across the Arab world in 2011. In addition, the lure of radical militancy will continue to
appear as a way out for young people, as the significant number of Moroccan nationals fighting with radical jihadist group Islamic State
in Iraq and Syria attests.
Chapter 4: Operational Risk... 31
SWOT Analysis. 31
Operational Risk Index 31
Operational Risk... 32
TABLE: OPERATIONAL RISK SCORES.32
Market Size And Utilities . 33
TABLE: MIDDLE EAST AND NORTH AFRICA - MARKET SIZE AND UTILITIES RISK 33
Labour Costs ... 36
TABLE: LABOUR REGULATIONS GOVERNING FLEXIBILITY OF WORKFORCE... 37
Chapter 5: BMI Global Macro Outlook... 39
Global Macro Outlook.. 39
Brexit To Hit Global Growth.39
TABLE: GLOBAL ASSUMPTIONS..39
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %40
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %...41
TABLE: MACROECONOMIC DATA and FORECASTS..43

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