IMF Staff Concludes 2013 Article IV Consultation Meetings and Third Review of the PLL with Morocco

Press Release No. 13/529
December 19, 2013

An International Monetary Fund (IMF) staff team led by Jean-François Dauphin visited Morocco from December 5 to 19, 2013 to conduct with the Moroccan authorities discussions on the 2013 Article IV consultation, as well as on the third review of Morocco’s economic performance under an arrangement supported by the Precautionary and Liquidity Line (PLL). The IMF Executive Board approved a 24-month arrangement under the PLL in an amount equivalent to about US$6 billion (700 percent of Morocco’s quota) in August 2012. During its stay, the mission also met with representatives of the private sector and civil society. The discussions focused on recent economic developments, the medium-term outlook, and economic policies to strengthen the economy’s resilience and lay the foundations for stronger and more inclusive growth.

At the conclusion of the visit, Mr. Dauphin issued the following statement:

“Despite an unfavorable regional and global economic context, the performance of the Moroccan economy improved overall in 2013 after the difficulties encountered in 2012. Although the effects of the European crisis were felt strongly in the nonagricultural sector, GDP growth is expected to reach about 5 percent owing to a bumper cereal crop.. Inflation remained low. The external current account deficit declined significantly and reserves remained stable at about 4 months of imports, helped by strong foreign direct investments. Public debt remains sustainable and the fiscal deficit is contracting owing in particular to the measures taken by the government.

Growth in 2014 could reach close to 4 percent, as the nonagricultural sectors accelerate and on the assumption that cereal output returns to average levels. However, the Moroccan economy remains vulnerable to international conditions. Although the global outlook is improving, the international economic environment remains fragile. In this context, it is important that the authorities continue the reforms undertaken to rebalance the fiscal and external accounts, strengthen competitiveness, ensure stronger and more job-rich growth, and improve social protection, particularly for the most vulnerable segments of the population.

In this context, the fiscal deficit of 4.9 percent of GDP targeted by the 2014 draft budget law is appropriate. It is important that the public deficit reduction leaves sufficient fiscal space to strengthen social protection and invest in infrastructure, education, and health. We welcome the government’s efforts to begin to reduce tax exemptions, particularly in the agricultural sector, and to reduce the cost of the subsidy system. The reform of the pension system is also urgent to ensure its viability and preserve fiscal sustainability. It is also important to strengthen and modernize the fiscal framework through a new organic budget law.

Improving competitiveness is necessary to consolidate Morocco’s external position. The efforts made in recent years to diversify export markets and products and attract additional foreign direct investment have already begun to bear fruit. In our view, greater flexibility in the exchange rate regime would help support competitiveness, enhance the capacity of the economy to absorb shocks, and support the globalization and diversification of foreign flows. Pursuit of the reforms aimed at improving the business climate, transparency, and the judiciary is necessary to continue to attract and stimulate private investment. It is also important to implement appropriate policies to increase the job content of growth.

The banking sector remains stable on the whole. We support the efforts of the Bank Al-Maghrib to strengthen its banking supervision arrangements, including gradual adherence to the Basel III norms, and to ensure adequate provisioning of non-performing loans, which increased slightly this year. To increase the potential growth of the economy, it remains necessary to continue financial deepening and increase access to credit, particularly for small and medium-sized enterprises.

The mission would like to thank the Moroccan authorities and all those with whom it had the opportunity to meet for their excellent cooperation and the productive discussions held.”



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