Growth, inflation, deficit… The warnings of the World Bank

A few days after the diagnosis of the HCP ( High Commission for Planning), the World Bank seems to confirm the difficult situation of the post-Covid Moroccan economy. This year, economic recovery in Morocco is running dry, as shown by the latest report from this Bretton Woods institution. After the effects of the Covid crisis and the war in Ukraine, the recovery was hard hit by the shock of the drought, according to the explanations of World Bank experts, during the round table held to present the conclusions of this document. Experts from this institution insisted on the systemic nature of the problem of water scarcity in Morocco. Admittedly, the country has succeeded in sustaining strong growth in agricultural added value, “but this model could show signs of running out of steam”. Hence the importance of “better managing water demand”. Especially since currently, “rainfall shocks are an important source of economic volatility”. 
In detail, the observation is clear: after a good year in 2021, having enabled the achievement of a real GDP growth rate of 7.9%, Morocco “is once again suffering the impact of a series of negative shocks”. The beginning of the agricultural campaign was impacted by drought. A poor cereal harvest is expected for 2022, according to the World Bank. This situation coincides with a slowdown in the global economy and an increase in international commodity prices. According to this report, “these shocks turned out to be mutually reinforcing, given that with the drought, Morocco would have to import larger volumes of cereals, at significantly higher prices due to the war in Ukraine”. As a result, the growth forecasts are revised downwards. World Bank experts predict a growth rate of 1.3% in 2022. “This is one of the sharpest falls on the international scene”,  said Javier Diaz Cassou, senior economist at the World Bank.
For the next few months, World Bank forecasts predict a sharp contraction in the agricultural sector, with cereal production projected at 32 million quintals, a drop of 69% compared to last year. At the same time, international shocks should continue to fuel pressure on prices, with repercussions on consumption and on external and budgetary balances. In this context of uncertainty, «where it is difficult to make forecasts”, according to World Bank experts, the growth rate, which will drop to 1.3% in 2022, will have to rebound the following year to stand at 4.3%, as agricultural production normalizes, and global shocks begin to subside. The budget deficit, for its part, must remain above 5% of GDP. Ditto for the current account deficit which should widen to 5.2% in 2022, before reducing in the medium term. Nevertheless, the performance of the Moroccan economy in the long term “could be boosted by the structural reforms announced in recent years”, except that a “loss of dynamism could also weaken potential growth”.  

M.A.M.