Country Report Morocco October 2009

Outlook for 2010-11

• 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 and there will be widespread public disaffection with formal politics, particularly given the continued prominence of the monarchy in setting the policy agenda.
• 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.
• The fiscal account is expected to remain in deficit in 2010-11 as revenue growth recovers only modestly and spending continues to rise.
• The exceptional harvest means that Morocco has avoided a recession in 2009, but in 2010-11 agricultural performance will be weaker and other sectors will grow only modestly, and real GDP growth will average around 4% a year.
• We expect Morocco to record current-account deficits in 2010-11, although the shortfall should contract significantly in 2011 as services and current transfers credits pick up strongly.

Monthly review

• The Moroccan authorities have arrested a group of young Moroccans who were planning a forest picnic as a low-key protest against a law that bars Muslims from eating publicly during the fasting hours of Ramadan.
• The government's fiscal position deteriorated significantly in the first half of the year following several years of robust growth in tax revenue. Despite a fall in subsidy costs, the fiscal surplus narrowed sharply.
• The government has announced a reform programme, Halieutis, focusing on the fishing industry. The programme aims to modernise Moroccan fisheries, improve their international competitiveness and preserve fish stocks.
• Data for the second quarter of 2009 have shown that the economy expanded by 5.4% in real terms compared with the same period of 2008, largely thanks to a sharp rise in agricultural output.
• Inflation has remained in check despite a seasonal surge in food prices during August. Reforms to the consumer price index basket, which has not been altered significantly in decades, are being considered.
• Portugal Telecom and a Spanish firm, Telefonica, have agreed to sell their stakes of 32.2% each in Morocco's second-largest telecoms firm, Meditel, for a total of €800m (US$1.1bn) to their three Moroccan co-shareholders.

This report covers the following industry codes:
SIC Code: 49;1
NAICS Code: 22;11