Is the Moroccan economy experiencing a growth revival? Given that the economy is driven primarily by agricultural and non-agricultural GDP, and that our economic performance is strongly correlated to rainfall variation, things seem to have taken a turn for the better this year!
Since early 2017, despite a pick-up in economic activity, concerns over a possible trend reversal persist, with the projected 4% growth rate in 2016 scaled back to 1% at the end of last year. This has often been the case in the past when similar forecasts of strong growth failed to materialise.
Hope revives
The business climate has been plagued by concerns over an impending crisis which, given its long duration, has taken a heavy toll on the behaviour of economic agents.
With cost-cutting measures on the rise, austerity has bogged down companies across all business sectors, putting a brake on investment, resulting in a wait-and-see attitude characterised by a lack of confidence.
It must be acknowledged that it is with every good reason since our investors tend to place all their bets on one or two sectors that are in vogue. This was the case with the textiles sector more than two decades ago. Since then, numerous companies in this sector have had to shut down due to poor management, a lack of foresight and inadequate productivity.
Fez is an example of this kind of debacle. In the early ’80s, it was the second largest industrial city in the Kingdom!
This was also the case with the real estate sector which, after the bubble burst two years ago, is still feeling the effects even today.
To achieve sustainable growth which benefits everyone, the economy needs to diversify and become less dependent on the vagaries of the weather.
This is exactly what Morocco has been trying to do with its strategy of developing and transforming its industrial sector and boosting growth. It’s the first time that momentum has been maintained in the tertiary and primary sectors as well as a decent performance by the secondary sector, as can be seen in the latest figures published by the DEPF, which deserves considerable credit for providing these important figures so rapidly.
Indicators, as green as the grass in spring
After contracting in 2016, agricultural value-added has bounced back sharply in 2017 with cereal output jumping by 203% and the other agricultural sub-sectors also performing strongly.
But if we were to simply congratulate ourselves on the turnaround of the agricultural sector, we would still not be out of the woods!
Phosphate production, which is another unpredictable growth driver given its reliance on global demand, also registered a sharp increase, with production of phosphate rock up 26.1%.
But above all, it is the construction sector, in the doldrums for such a long time with cement sales stagnating, that is now showing signs of recovery. Cement sales rose by 42.2% at end-July 2017, resulting in a negative year-on-year growth rate of just -4% versus -9.2% at end-June 2017.
It’s been five years since we’ve see such strong growth! Furthermore, the real estate sector, which is a heavy consumer of cement, would appear to be experiencing some tightness with mortgage loans up +3.8% at end-June 2017 versus +2.1% the previous year.
The best is still to come?
Morocco also continued to benefit from its reputation as a tourist haven, with tourism indicators continuing to turn up.
At end-June 2017, tourist arrivals in Morocco increased by 9.2% while overnight stays rose by 17.7%. An even better performance is anticipated July and August given that air traffic passengers and overall port activity increased by 11.5% and 10.1% respectively at end-June 2017.
With inflation well under control, up by a 0.9% at end-June 2017, the trend in domestic demand, a critical factor for sustaining growth, has remained positive, underpinned by an exceptional agricultural performance, positive growth in consumer loans (+4.4% at end-June 2017) and 58,000 jobs created in second quarter 2017.
Doesn’t this job creation, albeit modest in size, provide concrete proof of an economic growth revival? By contrast, we still don’t seem to understand that the only solution to meeting the enormous expectations of our youngsters is through education and employment…
Investment, primarily driven by the state, saw some diversification in 2017, as illustrated by a healthy trend in investment loans, up +9.4% at end-June 2017.
This trend was also reflected in imports of capital goods and purchases of semi-finished goods, which rose by 1.8% and 2.8% respectively.
FDI increased by as much as 33.8% at end-July 2017, after receiving a shot in the arm from the Peugeot Citroën factory in Kenitra.
Merchandise exports, another indicator of value creation, increased by 7.1% at end-July 2017, comprising exports of agricultural products and foodstuffs +10.1%, phosphates and phosphate derivatives +7.9%, automobiles +2%, aeronautics +10.3% and electronics +6.4%.
Yes, but….
The automotive sector still doesn’t provide a significant boost to our export performance as can be seen from production at the Renault Melloussa plant, among others. Foreign currency inflows are relatively insignificant due to the fact that sector’s ratio of domestic added value to gross exports, which officially stands at 40%, barely exceeds 18% in reality!
Turning to the financial sector, at end-June 2017, bank loans rose by 6.2% versus +2% last year, with growth next to nothing in previous years, therefore pointing to a revival of economic activity.
Two negative indicators stand out in this economic review. The first relates to imports, which rose by 7%, with energy costs accounting for 59.3% of the increase. Such a trend will be difficult for Morocco to manage should it continue. Fortunately, for a whole host of reasons, oil prices remained below the USD 50 per barrel mark.
By contrast, net international reserves are falling at a faster rate. At end-June 2017, they fell by 14.7% versus -5.8% the previous month and +24.7% at end-June 2016. This means that Morocco’s external trade balance expanded by 10 points in just a month.
As a result, the interbank market needed more liquidity this summer, a trend which is expected to continue through July 2017. No doubt, this was due to an increase in notes and coins in circulation, which is itself an indicator of economic revival, but it was also due to the decline in net international reserves, pushing the interbank rate to 2.32%
Bank Al-Maghrib injected as much as MAD 62.3 billion in July versus MAD 48.7 billion in June and MAD 22.3 billion in May.
Record levels which point to a certain amount of overheating …
Afifa Dassouli
Original article : https://lnt.ma/maroc-economie-pari-dune-reprise-de-croissance/