Bumpy road for the Moroccan economy

The Kingdom of Morocco is enduring a difficult year for its economy, just as any other country in the world coping with this “annus horribilis” of 2020’s covid-19. However, the situation of Morocco is especially tricky, making it worth to analyse what dangers should businesses with stakes on the country be looking for.

 

The first issue to mention is the considerable drought this last spring and ongoing summer has struck the Maghreb region, extending the lack of precipitation for two years in a row. Upon February of this year the North African country saw its rain levels having a deficit of 78% compared to the previous season. This situation of extreme weather patterns comes from a larger trend of decades caused by climate change that affects the whole region of the Maghreb. While the virus was just a concern for the Chinese authorities in Wuhan, the drought was affecting one of the three pillars in Moroccan economy. Its agricultural sector employs 33% of Morocco’s total workforce (around 12% of its GDP) mainly in small traditional farms, which have been more prone to be affected by weather changes. A low yield harvest was already expected, so the government had prepared several measures to mitigate its social and economic impact.

 

Then came covid-19 to the rest of the world, which has not hit the country much harder in comparison to many other neighbours, but it effectively shut down all EU member states borders, halting for some months the function of the European common market. Moroccan exports consist mainly of products from the automotive and agricultural sector sent to European countries, which has made its total export goods plummet from 39% of the GDP in 2019 to a 18% of the GDP in 2020’s first half. Furthermore, the last economic pillar and most important sector in Moroccan economy, the tourist sector, has been also affected by the border restrictions for the constraint of the virus. Consequently, we have seen how Morocco’s economic growth in 2020 slowed up to a 2% in March 11th and in July 13th had already shrank by 5.8%, marking it to be the black spot year in an otherwise long term positive path for the country’s economy.

 

According to the World Bank, real GDP will decline by 4% in 2020. The return of growth to its path should take place gradually from 2021, with an expected increase in GDP of 4.4% compared to 2020. Non-agricultural activities should recover, posting an increase of 3.6 %, in line with the recovery in domestic and external demand, while the return of seasonal climatic conditions would encourage an increase in agricultural added value. This outlook “remains surrounded by an exceptionally high level of uncertainties linked in particular to the evolution of the Covid-19 pandemic.

 

Businesses active in the Moroccan economy will have to bear in mind this last quarter of 2020 and 2021 will be a difficult time to thrive and survive; but those who will arrive better fit at the start of the recovering will be those who will lead its economy in its long term period of growth towards its full potential.

 

In adminex Morocco we provide the needed know how of the country that will help international SMEs get through the complications of global trends and unexpected events such as the mentioned droughts and covid-19.

by Pol Bragulat  –  adminex Morocco