Morocco: Border closure will weigh on Q1

We have downgraded our real GDP growth forecast for Morocco in 2022 as the country contends with the Omicron variant of Covid-19 and its effects on the tourism sector in particular. Nevertheless, our projection of 3.8% this year would still see a stronger pace of growth than the consensus estimate if realised. We anticipate that the adverse effects of the pandemic should dissipate through the year, while government reform efforts and increased investment will help stimulate activity both in the near- and medium-term horizon.

Morocco real GDP growth, % y/y

Source: Haver Analytics, Emirates NBD Research

Annualised growth in Morocco has slowed as the favourable base effects related to 2020’s near shutdown and the poor harvests seen in 2019 and 2020 have passed through. The expansion rate was 4.9% in Q4, down from 7.8% in Q3 and 15.2% the quarter prior to that. Agriculture maintained its near-20% growth rate, but with the easy gains related to the initial reopening and the improved harvest now in the bag, growth will be slower this year.

This is especially the case as we have seen a renewed impact on the economy caused by the coronavirus as 2022 has begun. The rapid spread of the Omicron variant through the closing months of 2021 led to the Moroccan government shutting its borders from end-November until the end of January at least, in a further blow for the beleaguered tourism sector. Q1 is not the busiest time of year for visitors, but the millions of dollars of lost revenue is another blow for a sector which accounts for around 15% of GDP and is a major employer. Government handouts to tourism workers for the final quarter of last year will have alleviated some of this hardship, however. Nevertheless, we expect that the remainder of the year should see a robust recovery in the tourism sector as both domestic and international restrictions continue to ease. The high levels of vaccination in Morocco should allow the country to reopen safely once more without undue risk to the population.

Morocco budget balance, % GDP

Source: Haver Analytics, Emirates NBD Research

The recovery of the agriculture and tourism sectors, among others, should see an improvement in government revenues, while the easing of the pandemic should forestall any further ramp-up in subsidies and transfers. As such, we anticipate that Morocco’s budget deficit will continue to narrow – we forecast a shortfall equivalent to -5.8% of GDP in 2022, compared with an estimated -6.5% last year. Nevertheless, the commitment by the government to increase investment will be supportive of growth as the Investment Commission has pledged to boost spending to MAD 7.2bn, with much of this going into higher education and tourism, thereby supporting growth in the long term as well as in 2022. The commission has predicted that these investments will help support 4,500 new jobs which will aid in bringing down the unemployment rate. This fell to a pandemic low of 11.8% in Q3, but still remains high by recent historical levels.