The IMF praises the Moroccan economy… its continued resilience and expectations of high growth

A clear positive tone was conveyed by the latest country reports of the International Monetary Fund regarding the assessment of the public financial conditions and macroeconomic indicators of the Kingdom of Morocco. This was nominated after the Executive Board of the International Monetary Fund concluded the “Article IV Consultations” for the year 2024, by approving the first review of the “Facilitation of Resilience and Sustainability” agreement concluded with Morocco, concluding that “Morocco still meets the eligibility criteria to benefit from the “flexible credit line” agreement.” Thanks to the strength of its macroeconomic policies and institutional policy frameworks, and its commitment to continuing reforms.

“The Moroccan economy remains resilient and resilient despite water scarcity, the September 2023 earthquake, and the challenges posed by external conditions.” These were the most prominent conclusions of the country report on Morocco (No. 2024/099) issued at the beginning of this May. After completing the mission of the Fund’s expert mission, which was carried out from January 30 to February 15, 2024 in Casablanca and Rabat, which was reviewed by the electronic newspaper Hespress.

Estimates of International Monetary Fund experts, who used data from the Moroccan economic authorities, stated that “expectations indicate a gradual rise in the real GDP growth rate to 3.5 percent over the next few years,” attributing this to “the virtue of continued work on implementing the reform plan.” “structural”; While they recommended that “it will be necessary to rebuild financial safety margins, in parallel with the implementation of structural reforms to further strengthen Morocco’s resilience and improve prospects for greater and more inclusive growth.”

The same assertion was renewed in a press statement issued from Washington late yesterday, Wednesday, viewed by Hespress, stressing that “the Moroccan economy has once again demonstrated resilience in the face of the negative shocks of 2023, with economic activity accelerating, inflation slowing, and the current account deficit shrinking.” Despite the headwinds associated with water scarcity, the earthquake last September, and the slowdown in growth in the euro area.”

“Continue to stand firm”

Without ambiguity, the International Financial Corporation confirmed that “the Moroccan economy has continued to withstand negative shocks”; He explained: “Despite water scarcity, the September 2023 earthquake, and the challenges posed by external conditions, economic activity levels rose to 3 percent in 2023 thanks to strong exports and a recovery in domestic demand. However, the improvement in growth was accompanied by an increase in unemployment rates to 13.3 percent at the end of 2023, which mainly reflects the impact of water scarcity on the agricultural sector.”

The “IMF” monitored “a decline in inflation during 2023, primarily due to the decline in the repercussions of supply shocks, in a way that led to the cessation of the cycle of tightening interest rates at the Bank of Morocco since June last year, following three successive increases starting in September 2022.” The Dirham continued. “Move within the exchange rate volatility range of ±5 percent.”

On the other hand, the mission’s experts noted, as part of their review, that “the current account deficit recorded a huge decline.” While the same report considered this “a reflection of the decline in the goods trade deficit (as a result of the decline in the prices of energy imports, raw and intermediate goods, and food, and the strong performance of automobile and electronics exports), the prosperity of the services export sector (tourism and non-tourism), and the continued growth of incoming remittances from workers abroad.” .

Improvement of public finances

The Fund’s experts recorded “an improvement in the central government’s public finance deficit that exceeded the expectations of the 2023 budget.” The total deficit reached 4.4 percent of GDP at the end of 2023, that is, less than expected in the 2023 budget by about 0.5 percent of GDP. They explained this by “the improvement in public finance revenues (thanks to the role of… “The earthquake fund to support non-tax revenues, which exceeded expectations and exceeded the unplanned increase in spending levels.”

Implementation of the announced structural reform plan continues, and the first two pillars of the social protection system have already been implemented. They are expanding the scope of compulsory basic health insurance and launching cash transfer programs for poor families. Additional steps were also taken towards restructuring state-owned companies, activating the Mohammed VI Investment Fund and the new investment charter, and reforming the education and health care systems.

Executive Board welcome

The Executive Directors agreed with the general line of the Fund’s staff assessment, welcoming the resilience of the Moroccan economy in the face of recent shocks and the very strong macroeconomic policies and institutional frameworks implemented by the authorities that contributed to increased growth and decreased inflation.”

“In light of the risks of adverse developments and great uncertainty surrounding the prospects, the directors emphasized “the importance of continuing precautionary macroeconomic policies and persevering in implementing structural reforms to achieve more robust, resilient and contained growth.”

The “monetary policy position of the Bank of Morocco” received the support of the directors of the “Bretton Woods Institution,” agreeing on “the necessity of continuing to use data in adjusting key interest rates in the future.” The central bank should also resume the planned shift towards an inflation targeting framework by preparing to cancel the peg system in conjunction with the continuing decline in inflation levels,” the same report stated among its recommendations.

Officials of the most prominent global financial institutions – according to what Hespress reviewed – stressed “the necessity of continuing financial control,” stating that “the 2024 budget achieves the right balance between rebuilding margins of financial safety and financing structural reforms.” While they “encouraged the Moroccan authorities to consider taking additional measures on the tax and spending side to achieve the planned reduction in public debt levels and to accelerate this if possible.”

Directors also encouraged further strengthening of the medium-term fiscal framework; “By announcing the implications of public-private partnerships, mobilizing government real assets on the budget, and continuing to work on a new public finance base based on the level of debt.”

Directors welcomed the progress made in Morocco towards strengthening the supervisory and regulatory framework for the financial sector, while calling for attention to the fact that “systemic risks surrounding the financial system remain limited” in a way that requires “continuing oversight of the volume of exposures on the balance sheets of financial institutions, especially climate-related risks.”

The Fund’s Board believes that “reforming the social protection, health and education systems will contribute to supporting the equity and quality of services provided and enhancing human capital in the long term.” Reforming state-owned companies, activating the Mohammed VI Fund and the new investment charter would contribute to encouraging private investment and creating sustainable jobs. To support Morocco’s potential growth, it is necessary to continue efforts to reduce dependence on fossil fuels, address water scarcity, strengthen governance, and address gender inequality.”

While optimism was expressed “about the progress made by the authorities towards meeting the terms of the Resilience and Sustainability Facility” agreement, Bank officials and experts welcomed “the ongoing work on the National Water Program and plans to reduce emissions to net zero by 2050, while encouraging” “Implement the measure to increase the value-added tax on fossil fuels on time, while mitigating its social repercussions.”