IMF predicts strong growth in Morocco

08 June 2015

Subsidy reforms have reduced deficits

  • IMF predicts 5 per cent GDP growth in Morocco in 2015
  • Morocco’s current account deficit expected to fall to 3 per cent of GDP in 2015 following subsidy reform

The Washington-based IMF fund has forecasted GDP growth of about 5 per cent for Morocco in 2015, following its review of a $5bn precautionary and liquidity line (PLL).

Morocco has not had to access the funds and does not plan to, unless its fiscal position declines considerably.

The IMF attributed the strong growth, which is higher than budgetary projections of 4.4 per cent, to good agricultural output and improving growth in other sectors. It projects that growth will accelerate in the medium term, as long as external economic conditions improve.

It praised Morocco’s subsidy reform programme, which allowed it to focus spending on the health and education sectors.

Morocco has reduced its subsidy bill to 3.5 per cent of GDP in 2014, compared with 4.7 per cent in 2013.

By the end of 2015, all subsidies on energy products will stop, with the exception of butane, making the country less vulnerable to oil price fluctuations.

However, cheaper oil is improving Morocco’s fiscal balance.

The external current account deficit decreased to 5.6 per cent of GDP in 2014. The IMF expects it will fall to 3 per cent of GDP in 2015.

International reserves have strengthened and the fiscal deficit is being reduced.

Public debt, meanwhile, continued to rise, to about 65 per cent of GDP, but is seen as sustainable. Inflation is low at about 1.5 per cent a year, according to the IMF.

However, central bank and pension reform have yet to be undertaken. Unemployment remains high, especially among the youth population, with 21.3 per cent of 15-24-year-olds unemployed in Q1 2015, according to the High Commission for Planning.

Rabat needs to keep international donors onside to ensure continuing infrastructure aid and investment. The power, water and health sectors have been particular targets for international financial institutions.

The $5bn PLL extension was signed in July 2014 and represents 550 per cent of Morocco’s quota.

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