Morocco’s macroeconomics indexes suffered limited setbacks for the first 10 months of 2014, stemming from the continued slowdown in the world economy and the eurozone countries in particular. The latter remained, until mid-2013, the main destination for Morocco’s exports and an attractive investment center for the majority of the productive sectors in the kingdom’s economy.
The flow of foreign direct investment reached about 21 billion dirhams ($2.4 billion) at the end of October, a decline of 4.4%. However, the remittances made by Moroccans working abroad increased during the same period despite the economic crisis in the countries in which they work and that are mostly European countries; the remittance rate increased by 0.7%, reaching around 50 billion dirhams ($5.6 billion).
It's expected that Morocco’s public debt will reach 57.31 billion dirhams ($6 billion) in 2014, while expenditures are expected to rise up to 195 billion dirhams ($21 billion), or 61% of the general budget, and for debt service to increase to $8.18 billion. International financial institutions such as Moody’s credit rating agency stress that Morocco is heading to a gradual reduction of the budget deficit as a result of the radical procedures adopted by the government, despite the unpopularity of such measures. The International Monetary Fund decreased its estimate of the growth rate this year from 4.2% to 3.1%, but it welcomed Morocco’s procedures, which were designed to alleviate the rate of foreign debt and reduce the public deficit.
The Moroccan authorities noted that they are working to strengthen the financial situation of the country during the follow-up program of structural reforms announced by King Mohammed VI in his speeches during his tour to listen to the people’s demands and needs. These reforms aim at correcting imbalances and identifying gaps and weaknesses in the Moroccan economy, in addition to enhancing the competitiveness that constitutes a way out for the Moroccan exports amid the global economic slowdown, which reflected negatively on the citizens’ purchasing power.
According to World Bank experts who visit the kingdom periodically, the main objective is to reach a stronger and more stable growth rate, noting that the support system reforms are bearing fruit. Fitch, the credit rating agency, believes these reforms allowed the reduction of the public deficit from 7.3% in 2012 to 5.4% for the last year and a decline to 4.3% is expected in 2015.
Interventions helped in getting foreign aid and donations, as well as the reduction of borrowing from international capital markets and international financial institutions in return for benefits in market prices, which eased the burden on the lower-middle income classes. These donations, especially from the Gulf countries of Saudi Arabia, UAE and Kuwait, in particular, have held off the specter of social protests at a time when many Arab countries are suffering crises as a result of the growing social tensions, the high unemployment rate and the low purchasing power.
However, the Moroccan government led by the Justice and Development Party is facing tough pressure on social and other issues from unions, which powerfully returned to the scene two months ago and were able to paralyze the country through a strike. ...
The fact that the Moroccan economy is keeping away from the red line is basically due to the strategy supervised by the Moroccan king himself. The strategy focused mainly on the diversification of partnerships and opening new markets for Morocco’s exports in addition to the the development of business initiatives and attracting foreign investment through adjusting laws in terms of facilitating the movement of profits and tax cuts. However, the most important measure was the king’s declaration of the need to have reforms within the judiciary and get rid of the obstacles that impede the flow of foreign investments.
Despite these positive measures and the safety of the economic, financial and monetary situation, which is closely and strictly monitored by the [Central] Bank of Morocco in order to respect the "Basel 2" and "Basel 3" terms, poverty is still a black mark haunting the Moroccan economy. This pushed King Mohammed VI to severely criticize the growing intensity of social inequalities in the country in his speech on the occasion of the "throne and people's revolution." He explicitly noted the existence of fundamental imbalances in the course of development, saying, “We do not want a Morocco where the rich benefit from the fruits of development and are made even richer, while the poor are dragged out of the course of development and made even poorer.”
The Moroccan economy’s bet for the next few years lies in taking advantage of the crises, lack of security and political instability a number of neighboring countries and certain Arab Mashreq countries are experiencing. The Moroccan economy can benefit from modernization, opening new markets and diversifying its partnerships, since such steps ensure the preservation of the economy away from risky red lines.
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