Morocco Economic and Strategic Outlook - February 2009

"In continuation of Global Investment House coverage of MENA economies, we have come out with Morocco Economic and Strategic Outlook.

Morocco's economy is based mainly on agriculture, industry, and services. Although, agriculture is an important sector, forming around 11% of GDP in 2007, the government has been successful in diversifying the economy in recent years, with agriculture and mining industries, mostly phosphates, becoming less important and manufacturing and services gaining more ground. However, a year of drought slowed down the growth in 2007 as agriculture production was hit by weather conditions. Despite the 15.3% y-o-y decline in agriculture, the primary sector, the secondary and tertiary sectors grew by 6%, and 11% respectively, which resulted in an overall growth of 6.6% in GDP in 2007. In the wake of the recent financial crisis, Morocco has revised its estimated growth rate for 2008 from 6.8% to 5.8%. Still the economy of Morocco will remain strong, and is estimated to grow 5.5% in 2009, though lower than the estimated growth in 2008.

The global financial crisis has shown a limited effect on Morocco’s economy so far, however, we expect the recession in Europe, Morocco’s major trade partner, to start impacting the economy in 2009 as it will hurt the trade balance of Morocco. Going forward, we do not expect major improvements in the current account surplus as the economic slowdown is likely to affect export growth on the back of lower demand from Europe. In addition, a global economic slowdown is likely to affect tourism receipts, and workers' remittances. However, on the upside, the drop in oil and commodity prices is likely to reduce import costs.

We believe that future challenges to Morocco's economic growth remain in lower export revenues, high public debt, and increasing unemployment rate. However, on the bright side, we expect that the economy will get through these challenges and sustain the growth achieved earlier given the government's commitment to the reform program, and the healthy investment environment which will induce the inflows from foreign direct investments.

In order to view the full report, kindly click on the headline."