Country Report Morocco February 2009

Outlook for 2009-10

• 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 and rising unemployment will be sources of discontent, and many Moroccans will turn to Islamist political movements as a result, but only a small minority of Moroccans are likely to support militant groups.
• Despite improved tax penetration, the budget deficit is expected to exceed 3% of GDP in 2009-10 as weaker GDP growth hits revenue and the government embarks on a major public investment programme.
• The Economist Intelligence Unit has lowered its forecast for real GDP growth given the worsening outlook in the EU—Morocco's main export market, although a strong harvest in 2009 will mean that Morocco avoids recession.
• Lower international commodity prices will help to push down import spending, particularly in 2009, ensuring that the current account returns to surplus in 2009-10, despite lower exports of goods and services

Monthly review

• Prospects for a revival of efforts to resolve the long-standing Western Sahara dispute have improved following the appointment in early January of a new UN envoy, Christopher Ross, for the disputed region.
• Owing to strong tax revenue growth the overall fiscal surplus for January-November (including privatisation proceeds) was only slightly lower, at Dh3.2bn, than in the same period of 2007, despite a doubling of subsidy costs.
• Office cherifien des phosphates and Banque Centrale Populaire have signed a Memorandum of Understanding over an exchange of stakes between the two institutions—the first between state-owned firms.
• Ambitious government plans to turn Morocco into an outsourcing hub for European services and manufacturing are likely to be hit by the European recession, but several projects have been launched in recent weeks.
• Real GDP growth slowed modestly to 5.4% year on year in the third quarter of 2008, reflecting slowing industrial and mining activity, which was only partly offset by robust agricultural performance.
• Morocco's agricultural sector has benefited from plentiful early rains and good early crops, which should boost output for the 2008/09 season. Rainfall has been extremely high, rising by 212% year on year by mid-December.

Source: Country Report

This report covers the following industry codes:
SIC Code: 1;60
NAICS Code: 11;52