Author: Carnegie Middle East Center Posted May 28, 2012
In Morocco, it took three months of give-and-take between the government and the legislature for the 2012 budget to be approved by both parties. Given the difficult economic circumstances at both the domestic and the international levels, this is hardly surprising.
During the first months of 2012 the average oil price for a barrel of oil exceeded $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 living there. The decline in crop yields — caused by erratic rainfall — has taken its toll on the living conditions of many Moroccans whose incomes are directly or indirectly linked to the agricultural sector. Morocco’s economic growth rate is expected to drop down to 2.5 percent this year.
After the constitutional changes imposed by the realities of the Arab Spring, we can say with confidence that the 2012 budget contains nothing new in terms of government-spending policy. Contrary to all expectations, the budget’s final version ended up being a continuation of previous budgets, despite the symbolic importance of the tax increase imposed on tobacco and alcoholic beverages by the ruling (Islamist) Justice and Development Party. In the absence of a thorough study, it is not clear whether this measure will increase revenue, reduce consumption or exacerbate smuggling and black-market activities.
In the coming months, social tensions may increase in light of worsening financial, economic and social indicators, as well as the government's failure to convince large segments of society that it is serious in its fight against corruption.
Some of these indicators are outlined below:
While these tough circumstances may have influenced the nature of this year's budget law, Morocco continues to suffer from structural imbalances that require a new social contract, one that ensures stability and balances current requirements with future goals. The current government should take advantage of whatever credibility it has left and implement policies to move from a rent-seeking economic structure based on the distribution of benefits for political support toward an economy based on competitiveness, productive investment in promising economic sectors and the lowering of regulatory obstacles that harm small and medium enterprises. This requires realism, courage and the practical implementation of the new constitution. While such an option will not satisfy everyone, it will serve the national interest and maintain stability. It is important to quit making lofty promises that raise expectations, as this is only followed by frustration when these promises are not met.
Lahcen Achy is an economic researcher at the Carnegie Middle East Center
Read More: http://www.al-monitor.com/pulse/business/2012/05/the-moroccan-economy-a-difficult.html
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