Morocco enacts reforms but obstacles remain

Morocco's economy is improving, but there is still room for improvement.

al-monitor A farmer picks strawberries, to be exported, in a field in the town of Moulay Bousselham in Kenitra province, March 15, 2014.  Photo by REUTERS/Youssef Boudlal.

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reforms, morocco, moroccan society, moroccan king, moroccan economy, economy, business

Aug 31, 2014

Morocco boasts a unique geographical location: It overlooks the Mediterranean Sea and the Atlantic Ocean; it is the closest African country to Europe; and it enjoys close relations with the European Union countries, especially France and Spain.

Significant Moroccan communities exist in European countries such as France, Belgium, Spain and Italy. Moreover, Morocco enjoys political stability, and King Mohammed VI has adopted a reformist approach. His government has sought to develop legislation governing economic activity and has enhanced the potential to create an attractive investment environment. This has reassured Moroccan and foreign investors and encouraged the adoption of numerous projects in vital sectors.

Morocco has a population of 33 million. ... Moroccans work in a variety of economic areas, the most important of which are traditional manufacturing industries, agriculture, mining and services. In 2013, the kingdom exported $22 billion worth of products. European countries are the main importers of Moroccan products, with 21% of exports being sent to France and 17% to Spain. Exports include garments and textile products, phosphate, fertilizers, vegetables and fruits.

However, Morocco remains a net importer, with imports amounting to $46 billion in 2013. Main imports are oil, telecommunications equipment, wheat, plastic products and electrical appliances. France and Spain remain the most important exporting countries to Morocco, followed by China, the United States, Saudi Arabia, Italy and Russia.

Morocco is a touristic country visited by tourists from Europe, North America, Japan, China and the Gulf. An estimated 9 million tourists visit Morocco every year, although that figure has fluctuated during the past five years. Morocco’s tourism revenues are estimated at $8 billion annually. The kingdom seeks to further benefit from its hills, valleys and all-year-round mild climate to attract tourists from all over the world.

In 2012, Morocco’s total GDP was $169 billion, while the average annual per capita income was $5,100. Agriculture still represents the most important sector in terms of workforce employment, with 44% of the labor force, while manufacturing industries only employ 20% and the booming service sector employs 35%. The unemployment rate in Morocco is close to the European Union’s 9% average.

With 15% of the population living below the poverty line, the government allocated significant amounts of the public budget to help its citizens cope with the burdens of life. This requires the allocation of funds to subsidize fuel and food. It also leads to increased spending and registering a budget deficit, since tax revenues and other revenues are not in line with spending allocations.

In 2012, the budget deficit reached 8.4% and public debt rose to 71% of the GDP. There is no doubt that this requires basic remedies, such as reducing allocations for commodity subsidies and other subsidies, improving the ability to collect taxes and providing other sources of revenue to the public treasury.

Despite these basic problems, Morocco developed the institutions working in the national economy and set the appropriate legal ground for the establishment of an active financial market encompassing the major companies and promoting trade of stocks and other financial instruments. There are important banking institutions in Morocco. They were established a long time ago and aimed at providing the necessary funding for numerous projects undertaken by the private sector. Moreover, Moroccan banks developed acquisitions and mergers operations among them; thus, ownership was modified and important foreign funds entered the country to acquire stakes in those banks.

Morocco’s government has striven during the past few years to encourage businessmen to expand their activities in various cities and geographical regions to provide employment opportunities for Moroccans. The government sought to expand the infrastructure; it built roads and power plants and provided mass transit systems, such as trams, in major cities such as Rabat and Casablanca. However, important challenges lie in the social reality, as millions of Moroccans remain marginalized, many of them working in non-core economic activities. The new government policies may succeed in developing the country’s capacities, following the adoption of programs that will raise optimism about the kingdom’s economic future.

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