Morocco

Morocco, the fifth largest economy in Africa, experienced a significant increase in growth in 2001, a surprising 6.5% compared to a meagre 0.9% in 2000. However, the Economic Report on Africa 2002 suggests that this growth was less the result of improved structural adjustments and policies adopted by the Government, and more to do with one of the fundamental weaknesses of the Moroccan economy. This refers to the fact that, as agriculture plays an important role in the economy (contributing 11-16% of GDP), the economy is vulnerable to climatic conditions and these were favourable in 2001.

Nevertheless, the Government has shown increased commitment to opening up the economy. This is being reflected in policies that have been adopted to attract foreign direct investment (FDI) from beyond the Middle East and North Africa. These include implementing a transparent privatization programme, removing tariff barriers, reforming financial sector regulations, and strengthening stock exchange operations. The Government has also intensified efforts to improve domestic competition, expand rural infrastructure, and reform agriculture with the aim of ensuring a more equitable distribution of the gains from trade.

The Report notes that while the policy approach is laudable, the fiscal situation remains a serious concern. The budget deficit increased to a projected 7.2% of GDP in 2001, up from 6.5% in 2000 (excluding privatization revenues). This was due in part to the large retroactive wage payments (the public sector wage bill absorbs close to half of fiscal revenues), capital transfers to public enterprises, and investment spending under the Hassan II Fund.

In fact, the deficit only remains within an acceptable range once privatization receipts have been taken into account. Once all assets have been sold, a real danger exists in building up arrears to domestic suppliers and increasing government debt.

Nevertheless, financially, several improvements have been made. The Central Bank has established credibility in maintaining price stability. Inflation is expected to drop from 2.0% in 2000 to 1.9% in 2001/ The Central bank has also taken steps to strengthen its supervisory and regulatory functions in the financial sector so that the overall banking sector can remain healthy.

Social pressures pose a significant threat to ongoing political transition. Poverty is growing in Morocco, particularly in rural areas. Currently, 19% of Moroccans live below the national poverty line. In addition, while life expectancy is relatively high, infant and maternal morality rates are also high compared to regional averages, possibly due to gender disparities in the provision of education. Also, the country has one of the highest illiteracy rates in the region, standing at about 52% in total, with a discouraging 83% for females in rural areas. Furthermore, unemployment has steadily increased over the last decade and currently stands at approximately 21.5% in urban areas.

The Report observes that Morocco's real GDP growth is unlikely to exceed 3.5% in the near future. A major challenge is to reduce the reliance of the economy on fluctuating oil prices and favourable weather conditions.