Morocco eco

Morocco - Strong economy resists financial crisis

Morocco resisted the world economic downturn thanks to its macro-economic policy, said WTO deputy director-general Alejandro Jara, adding that the kingdom weathered the crisis unlike many other countries.

Morocco succeeded in containing the crisis unlike many other countries, even developed ones, Jara told the daily "Aujourd'hui le Maroc", adding that this reflects Morocco's good macro-economic policy.

Jara pointed out that Morocco has "a very open economy" and "a clear trade policy" and called on Morocco to develop its ties with other African, Latin American, and Asian countries to diversify its investment opportunities.

Morocco boasts a special geopolitical and economic situation in the Mediterranean region, mainly in its relations with Europe and France in particular, he said, adding that the kingdom should adopt a global trade policy.

During the last 30 years, Morocco has embarked on a gradual but solid program of human development and political liberalization. Since the 1970s, gross national income per person more than quadrupled from $550 to $2,770. The average life expectancy has increased from 55 years in 1970 to 72.5 in 2007.  During the same period, the average number of births per woman has seen a dramatic decline from 6.3 to 2.3 while the number of children dying before age one has dropped from 115 to 38 (per 100,000 live births). Substantial educational improvements during the past 30 years include a primary school net enrollment increase from 47 to 93.5 percent in 2007/08. Access to safe water is expanding particularly rapidly with quasi-universal access to potable water in urban areas where 83 percent of households are connected to reliable network service and the rest rely on standpipes and vendors.

Morocco has made particularly strong economic progress since 2001 with growth rates averaging around 5 percent, a progressive diversification of the economy and solid macro-economic management.  This has allowed it to bring about a decrease in the overall poverty rate from 15.3 percent in 2000/01 to 9 percent in 2006/07.  Morocco benefits from a dynamic civil society and private sector, and a capable Government with a clear vision.  It is fully committed to greater regional integration, particularly with Europe where it holds “Advanced Association Status” with the European Union.  Investors’ confidence has increased substantially in response to the reforms in the investment climate which have been supported by the Bank among others.  In particular FDI has increased, reaching $4.5 billion or 6 percent of GDP in 2007 (the global financial crisis has had an impact on this however with FDI expected to decline by 20 percent in 2008).  Unemployment rates are falling constantly and are now at a 30-year low, although they do still remain high at around 9 percent.  These features, together with a relatively good base of human and physical capital and a critical geographic position at the mouth of the Mediterranean, have positioned Morocco well on the international stage to achieve stronger growth and development and derive greater benefits from integration and globalization.

Despite progress, Morocco still confronts formidable challenges, which include vulnerability to shocks (natural and economic); inadequate social indicators relative to the country’s income level; high unemployment, especially among youth; and increasing pressure on natural resources, especially water, which is exacerbated by climate change. Large segments of the population remain socially and economically marginalized and, notwithstanding the considerable reduction of absolute poverty, economic vulnerability remains widespread. Health indicators – especially for women and children – are well below what they should be with an especially high incidence of maternal mortality (227 for 100,000 live births in 2003) and child malnutrition (estimated at one in five children).  The speed with which primary education has been generalized has not been accompanied by a similar progress in education yields: access to primary education is almost universal yet only two-thirds of children aged 6-11 complete primary school.  Although Morocco is a strong reformer in the area of private sector development, the pace of structural change of the economy remains slow and the private sector is still not fully convinced of the credibility of reforms, the effectiveness of policies and their equal enforcement across the board.

Consolidating development achievements will necessitate sustained and faster growth which itself will hinge on improving competitiveness.  So far, Morocco has pursued a strategy of selective market opening through bilateral agreements which have allowed it to grasp some of the opportunities offered by global markets.  But its overall trade regime retains a fundamental anti-export bias compounded by the fixed exchange regime.  To reap more benefits of globalization, Morocco will need to step up its efforts on reforming the trade regime and opening the domestically-focused services sectors to competition.  Moroccan agriculture remains one of the least productive in the region, employing about half of the labor force but contributing just 16 percent to GDP.  The challenge is to move up the value-chain in agricultural production and reform the sector through phasing out the ineffective subsidy system and protection of cereal production.   Finally, the role of the secondary and tertiary sectors will need to expand in order to bring about the much sought-after employment creation.  This calls for further sophistication, identification of production niches where competitiveness can be pursued and a transformation of the economy to a more knowledge-based one.

Ensuring common prosperity is a major policy imperative which calls for the pursuit of a growth strategy that is both poverty-reducing and equity-enhancing.  Reducing unemployment is key to closing the gap between the prosperous elements of the country and the poor and disadvantaged ones.  Current rates of growth are insufficient to absorb the growing labor demand produced by Morocco’s demographic transition, the diminishing role of agriculture in absorbing labor and the social transformations which have led to a more active role of women in the job market.  The government has intensified its efforts at building efficient social safety nets and social insurance schemes in the past years but ineffective redistribution mechanisms, volatile food and energy prices and natural disasters still threaten the livelihoods of the poor and vulnerable.

Morocco is also confronted by a poor endowment of natural resources which is being further threatened by the negative impacts from climate change.  Water scarcity is the most urgent issue in this regard – Morocco already faces insufficient water resources to meet current needs and climate change will impose further constraints.  This is exacerbated by poor water use in agriculture and weak water sector institutions.  The country is heavily dependent on energy imports (97%) and lacks the needed investments to maximize the vast potential offered by solar and wind energy sources.

Morocco government has set out a clear path for its development goals and has embarked on a wide-ranging economic and social reform program.  This program is intended to continue and improve the good performance in growth rates with stepped-up efforts in strengthening governance, improving the business climate and ensuring greater prioritization and implementation of reform efforts.  In assuming the throne in 1999, King Mohammed VI set out a vision of rapid growth, poverty eradication and better social conditions.  Since then, successive governments have articulated this vision by identifying the sectoral and structural constraints based on sound analysis, developing a set of sector strategies and allocating public funding to strategic priorities.  The result is an ambitious program of political, economic and social reforms, whose effects are starting to be visible today.



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