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Morocco outlook

Daniel Richards - MENA Economist
Published Date: 04 July 2021


We have left our Moroccan real GDP growth forecast for 2021 on hold at 4.9% but acknowledge that the risk to this outlook is starting to tilt to the upside, and the Bank al-Maghrib holds a more bullish projection of 5.3%. The second half of the year will likely see a marked improvement in Morocco’s economic performance, as the reopening of the crucial tourism sector in mid-June will enable non-agricultural GDP to start catching up with the expansion seen in agriculture in the first quarter. Nevertheless, the Moroccan economy will still be smaller than it was prior to the pandemic given the -7.1% contraction seen last year, and with unemployment still at elevated levels it will take time for its impact to fade.

Real GDP growth, % y/y

Source: Haver Analytics, Emirates NBD Research

First quarter growth results for Morocco were somewhat mixed, with a substantial y/y expansion in agriculture far out-shadowing what was a fairly sluggish performance in the rest of the economy, which was still weighed down by Covid-19 related restrictions on activity. Agriculture grew by 14.7% y/y, while non-agriculture GDP contracted -1.0%. Some of these dynamics would have carried over into the second quarter, with agriculture set to perform well throughout the year on the back of favourable weather conditions that are expected to return generous harvests, while the ongoing pandemic would have continued to exert pressure on the rest of the economy through April and May at least. However, base effects because of the shutdown of the economy in the corresponding period in 2020 mean that headline growth in Q2 should far exceed the sluggish 0.7% expansion in the first quarter.

Looking ahead, the reopening of Morocco to foreign visitors in mid-June, in time for the crucial summer holiday season, should mean a fairly robust expansion in the second half – in comparison to 2020 at least if not to 2019. At the King’s direction there are substantial discounts available on transport and accommodation which should help Morocco attract returning visitors, as will its substantial progress on its vaccination programme and in curbing the disease – around a quarter of the population have already received their two doses of the vaccine. While there remain salient and significant risks from the Delta variant of Covid-19 and governments’ response to the threat of new strains of the disease, the expectation remains that visitor numbers should stage a significant recovery in H2 21.

CPI inflation, % y/y

Source: Haver Analytics, Emirates NBD Research

A recovery in the tourism sector should help boost consumption levels in Morocco, which have been under pressure to date through the pandemic. In Q1 the consumer confidence index rose to 68.3, from 61.2 the previous quarter, but this remains far off the pre-pandemic 75.7 in Q1 2020. Unemployment has risen to 12.5% and 17.1% in urban areas, but here too the outlook is starting to improve already as the pace of job losses in the labour market has slowed to 202,000 in the first quarter compared to 451,000 in Q4 2020. Rising inflation, which has ticked up to a three-year high of 1.9% y/y in May provides further risk to consumption levels, especially should it lead to a hike in interest rates by the Bank al-Maghrib, but in its latest statement the bank held to the international central bank consensus that while this uptick in price growth would continue, it ‘still would be of a temporary nature.’