Country Report Morocco July 2009

Outlook for 2009-10

• The Economist Intelligence Unit expects the political scene 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 unemployment will be sources of discontent, and some Moroccans will turn to Islamist political movements as a result, but only a small minority of Moroccans are likely to support militant groups.
• Recent data show Morocco's fiscal position has strengthened considerably in recent years. However, the fiscal account is expected to move from surplus to deficit in 2009-10 as weaker GDP growth hits revenue.
• The exceptional harvest (agriculture still accounts for around 15% of GDP and 40% of employment) has led us to revise up our forecast for GDP growth in 2009, although we still expect non-agricultural growth to be weak.
• Falling goods and services export earnings will be only partly matched by lower import costs in 2009. As a result, we expect Morocco to record a current-account deficit, albeit a narrowing one, in 2009-10.

Monthly review

• Despite internal party tensions and its recent withdrawal from the government, the Parti de l'authenticite et de la modernite (PAM) won 21.7% of the seats in the municipal elections, ahead of all the other political parties.
• The mayoral elections have seen numerous cases of odd party alliances and of politicians switching allegiance after the vote.
• The government has decided to press ahead with an ???825m (US$1.2bn) expansion of the port complex to the east of Tangier, despite the recent withdrawal of both the foreign concession holders.
• Carlos Ghosn, the chief executive of Renault, a French carmaker, has confirmed that construction of a manufacturing plant near Tangier will proceed despite the global slump in car demand.
• Anas Alami has replaced Mustapha Bakkoury as the new president of the country's state investment vehicle, Caisse de Depot et de Gestion.
• Low liquidity has prompted Bank al-Maghrib (the central bank) to lower banks' reserve requirements to 10% from 12%.
• The fiscal position has deteriorated as the fall in fiscal revenue in the current economic slowdown has outpaced the decline of expenditure.

This report covers the following industry codes:
SIC Code: 60;70
NAICS Code: 52;72