Morocco: Economy

The Moroccan economy has been characterized by macroeconomic stability, with generally low inflation and sustained, moderately high growth rates over the past several years. Morocco's primary economic challenge is to accelerate growth and sustain that improved performance in order to reduce high levels of unemployment and underemployment. While overall unemployment stands at 8.6% (2010 est.), this figure masks significantly higher urban unemployment, as high as 31% among young urban males.

Recent governments have pursued reform, liberalization, and modernization aimed at stimulating growth and creating jobs. Since early in his reign, King Mohammed VI has called for expanded employment opportunities, economic development, meaningful education, and increased housing availability. The government has pursued an ambitious program of reforms to increase productivity and competitiveness of the national economy through sectoral strategies targeting energy, fisheries, industry, commerce, agriculture, tourism, and logistics. Promising reforms have occurred in the financial sector. Privatizations have reduced the size of the public sector. Morocco has liberalized rules for oil and gas exploration and has granted concessions for public services in major cities. The tender process in Morocco is becoming increasingly transparent. The government has invested considerably in infrastructure development, in particular Tanger-Med Port at the Strait of Gibraltar. When completed in 2014, Tanger-Med will be Africa’s largest port. Many believe, however, that the process of economic reform must be accelerated.

While economic growth has historically been hampered by volatility in the rainfall-dependent agriculture sector, diversification has made the economy more resilient. Despite an unfavorable international economic environment, Morocco’s economy grew by 4.9% in 2009, aided by an exceptional agricultural harvest. GDP was expected to grow at a 4% rate in 2010 and is projected to expand by 5% in 2011.

Through a foreign exchange rate pegged to a basket of important currencies and well-managed monetary policy, Morocco has held inflation rates to industrial country levels over the past decade. Inflation fell from 3.9% in 2008 to 1% in 2009, mainly due to the fall of world and local food prices. Inflation was projected to hover around 1% for 2010 and to reach 2% in 2011.

The persistent merchandise trade deficit driven by the country’s need for imported energy has been largely offset by inflows including transfers from Moroccans resident abroad, tourism revenue, and foreign investment. Since 2007, Morocco has run a current account deficit, mainly driven by a negative trade balance. In 2009, the current account deficit stood at 4.5% of GDP. Foreign exchange reserves somewhat declined in 2009 but remained adequate, making up nearly 7.6 months' worth of goods and services imports ($23.5 million). These reserves and active external debt management policies give Morocco ample capacity to service its debt. Current external debt stood at $19.3 billion at the end of 2009. As the country significantly reduced both its internal and external public debt, in March 2010, Standard and Poor's raised Morocco's foreign and local currency ratings by one notch (to BBB- from BB+ and to BBB+ from BBB, respectively).

In January 2006, the bilateral Free Trade Agreement (FTA) between the United States and Morocco went into effect. The U.S.-Morocco FTA eliminated tariffs on 95% of bilateral trade in consumer and industrial products with all remaining tariffs to be eliminated within 9 years. The negotiations produced a comprehensive agreement covering not only market access, but also intellectual property rights protection, transparency in government procurement, investment, services, and e-commerce. Other chapters spell out consultation and assistance mechanisms in the areas of labor and environmental protection. The FTA provides new trade and investment opportunities for both countries and has encouraged economic reforms and liberalization. Since its entry into force, bilateral trade between the two countries has increased 112% (2009 est.)

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