Despite the shocks, the economy is holding up well

In 2022, several factors have combined to deal a brutal blow to the Moroccan economy. The country is undergoing the impact of a string of both external and domestic shocks, namely a surge in commodity prices having generated inflation never reached in three decades (8.3% in December 2022), the economic slowdown in Europe, the drought (which explains 48% of the economic deceleration), and other shocks.

This situation resulted in the collapse of real GDP growth, which fell from 7.9% in 2021 to 1.2% in 2022, and a worsening of the current account deficit, which rose from 2.3% to 4.1% of GDP, according to World Bank estimates.

This Bretton Woods institution, which presented, on Tuesday, its report titled ‘‘Morocco Economic Monitor: Responding to supply shocks’’ (winter 2022/2023) , remains optimistic despite everything. The situation is therefore difficult, but not chaotic. Even if the cost of imports has soared, the good performance of exports and the receipts of Moroccans residing abroad, as well as the resumption of travel receipts, have relieved the balance of payments. The current account deficit, even though it has increased from 2.3 to 4.1% of GDP, remains “under control”. Morocco has also continued to attract foreign direct investments (FDIs), and to benefit from a fairly comfortable currency cushion, with nearly 6 months of imports.

The Government, for its part, has taken several measures to counter the repercussions of rising prices on households. The Cabinet has thus invested nearly 2% of GDP on subsidies for basic commodities, and to maintain pre-existing regulated prices (electricity, gas, wheat, sugar, etc.). ‘‘This approach has stabilized the prices of goods and services which absorb almost one quarter of average household expenditure, thus avoiding a more pronounced increase in poverty’’, underlines the World Bank. “The planned roll-out of the child benefit system will enable effective targeting of the vulnerable population in a cost-effective and equitable manner ”, added Jesko Hentschel, World Bank Country Director for the Maghreb and Malta.

The Moroccan central bank, for its part, raised its key rate twice, with a total of 100 basis points, to curb inflation. ‘‘Monetary policy has thus tightened, but remains flexible, compared to other countries in the MENA region, and even to developed countries’’, specified Javier Diaz Cassou, Senior Principal Economist at the World Bank in Morocco. With a relatively low policy rate, the Kingdom can even afford further increases. ‘‘The impact on growth should be limited ,” added Javier Diaz Cassou.

In 2023, the fundamentals should improve, and growth should accelerate. The risks are also on the decline, even if they remain likely: new health, climate, or geopolitical shocks, persistence of inflation and tightening of monetary policy, drop in revenues, and other risks. On the other hand, people are betting on a faster improvement of the international environment, and on a better impact of the structural policies undertaken by Morocco.

Ahlam NAZIH