Morocco year in review 2013

Source：Oxford Business Group 2014 Release Date：2014-02-07 306

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Morocco's economic performance improved considerably in 2013.

Despite some setbacks, Morocco's economic performance improved considerably in 2013. Though low demand from Europe was still a challenge last year, stronger agricultural output and high foreign direct investment, together with efforts to diversify export markets and restore the fiscal balance, pushed GDP growth up to 5%.

Morocco's financial indicators have inched downwards in the past few years as the trade deficit has grown, prompting the government to turn towards external sources and bond markets. However, the planned 2014 budget has also shifted funds to capital spending for infrastructure and housing construction, which along with sustained industrial activity will help sustain a still-robust level of expansion over the coming year. Growth estimates for this year range from 2.5% by Moroccan authorities to 4% by the IMF.

Shoring up public finances

A December IMF assessment noted that Morocco's public debt, though high, is sustainable, and that the fiscal deficit is beginning to shrink as the government pulls back its expenditures. The tightening balance sheet has led the government to reduce spending on wages, reform its underfunded pension system, and overhaul subsidies for food and fuel, which cost an estimated Dh42bn (€3.73bn) in 2013.

Blanket subsidies are to be replaced with a system that targets the disadvantaged more effectively, although reforms have been delayed. Efforts to push through cuts to fuel subsidies divided Morocco's ruling coalition and prompted a cabinet reshuffle in October. Progress in this area is, however, gaining traction, and the 2014 budget aims to reduce the annual deficit to 4.9% of GDP from about 5.5% in 2013.

Even with these cuts, the Haut Commissariat au Plan, the agency in charge of economic planning, says the government will have to finance the equivalent of 7.4% of GDP from external sources in 2014. In a deal concluded with the World Bank in December, Morocco will receive $4bn (€2.9bn) in loans for state projects in energy and infrastructure - up to $1bn (€732m) a year between 2014 and 2017. This is an increase from the $600m (€439m) in annual loans provided under a previous agreement from 2011 to 2013. For Morocco's economic reform programme, it is a vote of confidence.

The government is also seeking to bolster the economy and public finances through international debt markets. Reports circulated in late November that Morocco may soon sell €1bn in eurobonds, which would make it the second-largest issuer of sovereign eurobonds in Africa. Most recently, Morocco raised $750m (€549m) through a debt issue last May. The bonds performed well over the course of the year, partly due to a boost in confidence as the state moved to cut its subsidy spending.

As the eurozone crisis and rising national deficits have kept liquidity tight, MoroJordan Shoes