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“The Moroccan economy once again demonstrated resilience to negative shocks in 2023, as economic activity accelerated, inflation slowed and the current account deficit narrowed despite the headwinds linked to water shortages (which caused serious job losses in the agricultural sector), the September 2023 earthquake, and weaker growth in the euro zone,” writes the IMF in its press release .
“The ambitious infrastructure plan announced by the authorities (notably in the water and energy sectors) should stimulate investment and growth over the coming years, with the current account gradually converging towards the standard at The budget deficit in 2023 was below the level projected in the budget and the authorities reiterated their commitment to gradual fiscal consolidation over the next three years. continued, particularly with regard to the overhaul of social protection, health and education systems.
The three essential points are:
• The Moroccan economy continued to demonstrate resilience despite the water shortage,
September 2023 earthquake and difficult external conditions. Real GDP growth is expected to gradually reach 3.5 percent over the next few years, driven by the continued implementation of the structural reform program.
• Rebuilding fiscal space while implementing structural reforms will be essential to further strengthen Morocco’s resilience and its prospects for higher and more inclusive growth.
“The Moroccan economy continued to demonstrate resilience in the face of negative shocks. Despite water shortages, the September 2023 earthquake and difficult external conditions, economic activity increased to reach 3% in 2023 thanks to to strong exports and a rebound in domestic demand [NDLR: 3,2% selon le plus récent chiffre provisoire du taux de croissance].
“Despite the resumption of growth, unemployment reached 13.3% at the end of 2023 [13% selon le HCP dans sa note provisoire], mainly reflecting the impact of water scarcity on the agricultural sector. GDP growth is expected to gradually reach 3.5 percent over the next few years, driven by the continued implementation of the structural reform program.
Inflation has declined over the course of 2023, mainly as the impact of supply shocks has faded. This justified BAM’s suspension of the interest rate tightening cycle since June last year, after three
consecutive increases from September 2022. The dirham continued to move within the fluctuation band of ±5 percent.
“The current account deficit has narrowed considerably. This reflects both a reduction in the trade deficit in goods (due to the fall in the prices of imported energy, raw and intermediate goods and food products, as well as the solid performance of automobile and electronics exports), the dynamism of service exports (tourist and non-commercial) and the continued expansion of remittances to Morocco.
“The central government’s fiscal deficit improved more than expected in the 2023 budget. The overall deficit for 2023 closed at 4.4 percent of GDP, about 0.5 percentage point of GDP lower than forecast in the 2023 budget. This reflects better-than-expected budget revenues (with non-tax revenues boosted by the Earthquake Fund) that more than offset higher-than-expected spending.
“The implementation of the announced structural reform program continued. The first two pillars of the generalization of the social protection system, namely the extension of compulsory basic health insurance and the introduction of cash transfers to poor families, have now been implemented. Other measures were taken to restructure public enterprises, operationalize the Mohammed VI Investment Fund and the new Investment Charter, and reform the education and health systems.
“The Directors agreed with the essence of the assessment of the IMF staff. They welcomed the resilience of the Moroccan economy in the face of recent shocks and praised the very solid macroeconomic policies and institutional frameworks of the authorities, which supported the recovery in growth and decline in inflation Noting the downside risks and high uncertainty surrounding the outlook, Directors stressed the importance of pursuing prudent macroeconomic policies and relentlessly implementing structural reforms. to achieve stronger, more resilient and more inclusive growth.
“Directors supported the monetary policy of Bank Al-Maghrib (BAM) and agreed that further changes to policy rates should remain data dependent. It would also be important to resume the Central Bank’s planned transition to a targeting framework inflation by preparing for the removal of the anchor.
“Administrators agreed on the need to advance fiscal consolidation and agreed that the 2024 budget strikes the right balance between rebuilding fiscal space and financing structural reforms.
“They encouraged the authorities to consider new tax and budgetary measures to guarantee, or even accelerate, the planned reduction in public debt. Directors encouraged further strengthening the medium-term fiscal framework, including accounting for the fiscal implications of public-private partnerships and the mobilization of real state assets, and continuing work on a new fiscal rule anchored in the debt.
“The directors welcomed Morocco’s progress in strengthening its financial supervisory and regulatory framework. They welcomed the efforts of the authorities to introduce capital supplements, develop a secondary market for PNLs [nonperforming loan] and to improve bank resolution and prepare a green financial strategy. Although systemic risks to the financial system appear limited, Directors stressed the need to continue to monitor financial institutions’ balance sheet exposures, particularly to climate-related risks.
“Administrators welcomed the authorities’ strong determination to implement structural reforms. Reforming the social protection, health and education systems would improve equity and quality of access and sustain human capital in the long term. Reforms of public enterprises and the operationalization of the Mohammed VI Fund and the new Investment Charter would stimulate private investment and create sustainable jobs. Continuing efforts to reduce dependence on fossil fuels, to combat shortages. water supply, improving governance and tackling gender inequalities are essential to strengthening Morocco’s growth potential.
“Directors were encouraged by the progress made by the authorities in meeting the conditions of the RSF agreement. They welcomed the ongoing work related to the national water program and plans to achieve net zero emissions of here 2050. Directors encouraged the timely implementation of the measure to increase VAT on fossil fuels, while mitigating its social impact. They stressed the importance of close collaboration with development partners.
“The Directors agree that Morocco continues to meet the qualification criteria for the FCL agreement, given its very strong macroeconomic policies and institutional policy frameworks, as well as its commitment to continued reforms.”
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