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Morocco Country Risk Report Q1 2017

  • November 2016
  • -
  • Business Monitor International
  • -
  • 39 pages

Core Views

Despite not possessing hydrocarbon wealth, the economy will remain an outperformer in North Africa over the medium term. Investor interest in the country as an export-orientated manufacturing hub for the European market and increasingly to West Africa, as well as relative security compared to the rest of the MENA region, will bode well for Morocco’s underlying growth momentum in the next few years. The all-important agricultural sector will nevertheless remain exposed to unpredictable weather patterns, resulting in significant volatility in headline growth.

Morocco’s foreign policy will remain stable, aimed at strengthening its relationship with the EU and the GCC and looking to West Africa for trade and investment opportunities. The Western Sahara issue will remain at the forefront of Rabat’s foreign policy agenda and we do not see any significant progress taking place on this issue in the near future. Morocco will underperform in North Africa in 2016, on the back of a lower than average harvest, which will significantly impact headline growth directly and indirectly through private consumption.

The slump will be short-lived and we forecast real GDP growth to recover from 2017. The gradual coming on-stream of new energy sources over the next five years – as part of the National Energy Plan 2020 – will reduce pressures on Morocco’s current account and boost the country’s attractiveness for foreign investors. This structural evolution will benefit the country’s economic growth over the next decade. Average annual inflation in Morocco will accelerate over 2017, as commodity prices rise, even as the government has cut down subsidies. Inflationary pressures will be short-lived and will stabilise around 2.0% y-o-y over the medium-term.

Table Of Contents

Morocco Country Risk Report Q1 2017
Executive Summary 5
Core Views 5
Chapter 1: Economic Outlook7
SWOT Analysis 7
BMI Economic Risk Index 7
Economic Growth Outlook 8
Recovering Rapidly From 2016 Economic Slump8
In 2016, Morocco's real GDP growth will decelerate to its s lowest pace since 1997, on the back of a sharp decline in agricultural
production Economic expansion will recover in 2017, and the 2016 dip should not mask the long-term positive trajectory of the
Moroccan economy
GDP By Expenditure Outlook 9
TABLE: GDP GROWTH FORECASTS 9
TABLE: PRIVATE CONSUMPTION FORECASTS 9
TABLE: GOVERNMENT CONSUMPTION FORECASTS 9
TABLE: FIXED INVESTMENT FORECASTS 9
TABLE: NET EXPORTS FORECASTS 10
Fiscal Policy And Public Debt Outlook10
Fiscal Consolidation Will Continue Following Legislative Elections Victory 10
The incumbent PJD's victory in the general elections in late October will mean that fiscal consolidation will continue in Morocco over the
coming quarters This bodes well for the country's public debt, which will decrease gradually from 2017
Structural Fiscal Position 12
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES12
TABLE: FISCAL AND PUBLIC DEBT FORECASTS 12
External Trade And Investment Outlook 13
Current Account Deficit: No More Improvements As Oil Prices Rise 13
After four years of improvement, Morocco's current account deficit will again widen from 2017, albeit moderately, as rising energy prices
increase the import bill The autos industry will drive export growth, while the phosphate sector will recover gradually Risks to the
external balance will remain low, with the country relying on sustained foreign investment and remittances to fund its current account
shortfalls
TABLE: BREAKDOWN OF THE BALANCE OF PAYMENTS FOR H116, MADBN 14
Outlook On External Position 14
TABLE: CAPITAL and FINANCIAL ACCOUNT BALANCE 15
TABLE: CURRENT ACCOUNT BALANCE FORECASTS15
TABLE: BREAKDOWN OF IMPORTS15
TABLE: BREAKDOWN OF EXPORTS 15
Chapter 2: 10-Year Forecast 17
The Moroccan Economy To 2025 17
Diversified Economic Base Underpins Bright Future 17
We point to an increasingly diversified economic base, an attractive geographical position, and strong investments in energy, autos and
infrastructure as 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 17
Chapter 3: Political Outlook 21
SWOT Analysis 21
BMI Political Risk Index21
Contents
Domestic Politics22
PJD Victory Bodes Well For Economic Trajectory 22
The PJD's victory in the legislative elections in Morocco will ensure policy continuity over the coming years, and bodes well for the
country's economic development With the PAM having more than doubled its strength in the House of Representatives, the PJD will
face a stronger parliamentary opposition, but this will not prevent it from ruling effectively in a coalition
TABLE: POLITICAL OVERVIEW 22
Long-Term Political Outlook 23
Challenges For The Coming Decade: Scenarios For Change 23
The ongoing political and economic reforms undertaken by the government in the last few 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 (IS) in Iraq and Syria attests
Chapter 4: Operational Risk 27
Operational Risk 27
TABLE: OPERATIONAL RISK 27
Business Crime 28
TABLE: BUSINESS RESPONSE TO RISK 30
Government Intervention 31
TABLE: INCOME TAX LEVELS31
TABLE: BUSINESS TAXES 32
Chapter 5: BMI Global Macro Outlook35
Global Macro Outlook 35
Austerity Has Peaked, But Populism Is Not Yet Policy 35
TABLE: GLOBAL ASSUMPTIONS35
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % 36
TABLE: EMERGING MARKETS, REAL GDP GROWTH, % 37
TABLE: MACROECONOMIC DATA and FORECASTS 39

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