Country Report Morocco June 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.
• 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 underlines the government's desire to push ahead with investment in education and infrastructure.
• Bureaucracy and financial constraints will limit the success of these efforts, and of attempts to make the agricultural sector more resilient to drought.
• Assuming that normal agricultural output resumes, the Economist Intelligence Unit forecasts that growth will rebound to 5.1% in 2008 and 5.5% in 2009.
• High international commodity prices will weigh on the import bill and, as a result of the subsidy system, on the government budget.
• We have raised our forecasts for inflation in Morocco in light of global trends.
• We have also revised up our forecasts for inward direct investment, given the scale of new infrastructure, property and tourism projects.

Monthly review

• On May 30th hundreds of demonstrators besieged the port at Sidi Ifni, on the south-western coast, to protest against unemployment and inflation.
• In early May Morocco banned al-Jazeera, a Qatar-based pan-Arab broadcaster, from transmitting a daily Maghreb news programme from its studio in Rabat.
• Fouad el-Himma, a confidant of the king and founder of a new association, the Mouvement pour tous les democrates (MTD), has heavily criticised the only legal Islamist group, the Parti de la justice et du developpement.
• The government has lowered its real GDP growth forecast for 2008 from 6.8% to 6.2%, probably reflecting expectations of the harvest.
• The budget for subsidies in 2008 has been revised up to Dh30bn (US$4.1bn) from Dh20bn. Saudi Arabia and the UAE have pledged a total of US$800m in aid to help Morocco deal with rising import prices.
• Trade data for the first four months show a widening of the trade deficit, as a 26.9% surge in import spending far outstripped a 13.7% rise in export earnings.
• In April the country's largest fertiliser distributor, Charaf Corporation, bought a controlling stake of 87% in its main rival, Fertima, a former state monopoly.

Source: Country Report