Country Report Morocco November 2008

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 unemployment will be sources of discontent, but only a 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 EUMorocco's main export market. We expect the economy to grow by 3.9% in 2009 and 4.6% in 2010.
• Lower international commodity prices will help contain import spending, ensuring that the current account returns to surplus in 2009-10 despite lower exports of services and goods.

Monthly review

• The EU and Morocco have agreed to an "advanced status" for Morocco's standing with the EU. "Advanced status" holds no extra legal weight but is supposed to promote stronger ties.
• The king has outlined reforms to the country's religious institutionsincluding ulema councilsto help promote more moderate interpretation of Islam.
• The central bank has raised interest rates in a bid to contain consumer price inflationwhich was 5.1% year on year in Augustbut financial turmoil and weakening EU growth prospects have made the policy climate challenging.
• The 2009 draft budget has been publishedwith a targeted deficit, including privatisation receipts, of 2.9% of GDP. Spending is budgeted to grow by 4.9% to Dh164.8bn (US$20.9bn).
• The government has said that the focus of the 2009 budget will be on human development, with an ambitious 16% increase in public investment planned.
• Both export earnings and import costs continued to rise rapidly in the first eight months of 2008, pushing the trade deficit higher. Tourism revenue has stagnated as the number of overnight stays by foreigners has fallen.
• With the global credit crisis threatening to dampen foreign investment inflows and demand for exports, the Casablanca Stock Exchange has weakened considerably despite generally strong profit growth across most sectors.

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