Country Report Morocco September 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, particularly given the continued prominence of the monarchy in decision-making.
• Poverty, unemployment and inflation will be sources of discontent, but only a minority of Moroccans are likely to support militant groups.
• The budget deficit will widen in 2008 as soaring subsidy bills more than offset the impact of better than expected tax revenue. Significant subsidy cuts are unlikely given concerns about inflation and poverty.
• The government will push ahead with efforts to upgrade infrastructure, boost the housing stock and make agriculture more resilient to drought, although bureaucracy and financial constraints will limit its success.
• Assuming that normal agricultural output resumes, the Economist Intelligence Unit forecasts that growth will rebound to 5.3% in 2008 and 5.5% in 2009.
• High international commodity prices will weigh on the import bill, pushing the current account deeper into deficit, and, as a result of the subsidy system, will also put a strain on the government budget.

Monthly review

• Fouad el-Himma, a close confidant of the king and former deputy interior minister, has founded the Parti de l'authenticite et de la modernite with the support of 35 MPs, giving it 11% of the seats in parliament.
• The security forces have arrested 15 men whom they suspect of belonging to an international militant network aligned with al-Qaida.
• The authorities' concerns about the potential for Moroccan expatriates to be radicalised in mosques overseas have been underlined by the decision to send 176 preachers to lecture to Moroccan expatriates abroad during Ramadan.
• The king, Mohammed VI, has used two major speeches to outline his policy priorities for the year ahead, emphasising the importance of the "Moroccan middle class" and of improving the education and justice systems.
• Data for the first seven months of the year show that the consumer price index grew by 3.7% year on year, mainly owing to rising food prices, which increased by 6.9%.
• Remittances from Moroccans living abroad have continued to rise this year, despite concerns about the potential negative impact of the euro zone slowdown on the employment of Moroccans in Europe.

Source: Country Report