Country Report Morocco August 2008

Outlook for 2008-09

• The political outlook is expected to remain generally stable, with no serious challenges to the central role of the king, Mohammed VI.
• Parliament will remain weak, with no party having a strong power base, and there will be widespread public disaffection with formal politics, particularly given the continued prominence of the monarchy in decision-making.
• Poverty, unemployment and inflation will be sources of discontent, but only a minority of Moroccans are likely to support militant groups.
• The expansionary 2008 budget, which has been revised mid-year to take into account higher spending and revenue, will increasingly be swallowed by subsidy costs.
• The government will push ahead with infrastructure investment, although bureaucracy and financial constraints will limit its success in this, in boosting the housing stock and making the agricultural sector more resilient to drought.
• Assuming that normal agricultural output resumes, the Economist Intelligence Unit forecasts that growth will rebound to 5.3% in 2008 and 5.5% in 2009.
• Rising world commodity prices will keep inflation higher than the long-term average in 2008-09.
• High international commodity prices will weigh on the import bill, pushing the current account deeper into deficit, and, as a result of the subsidy system, will also put a strain on the government budget.

Monthly review

• The king did not attend the launch of the Union for the Mediterranean in Paris in mid-July, which was unexpected given Morocco's enthusiasm for the initiative, but may have stemmed from rivalry with Algeria.
• The opposition Islamist Parti de la justice et du developpement, held its annual congress on July 19th-20th, electing a new leader, Abdelillah Benkirane and calling for a restoration of trust in politics.
• Although overall economic performance for the first six months of 2008 has been strong, spending on subsidies had soared. As a result, the finance ministry has issued revised projections for the 2008 fiscal accounts.
• Concessions have been awarded for two new container terminals in the expansion of the Tanger Med Port, which will more than double the port's overall capacity to 8m TEUs.
• Morocco's property and construction firms are taking advantage of a booming property market and strong demand for tourism and residential construction to raise capital.

Source: Country Report