{
  "title": "IMF Executive Board Concludes 2019 Article IV Consultation with Morocco",
  "publication": "IMF News, July 16, 2019",
  "sourceUrl": "https://www.imf.org/en/news/articles/2019/07/16/pr19279-morocco-imf-executive-board-concludes-2019-article-iv-consultation-with-morocco",
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  "summary": "Real GDP growth reached 3 percent in 2018.",
  "publishDate": "2019-07-16",
  "sections": [
    {
      "heading": "Economic activity and prices",
      "content": "- Real GDP growth reached 3 percent in 2018.\n- Economic activity weakened in 2018 due to lower growth in the agricultural and tertiary sectors.\n- Headline inflation reached 1.9 percent in 2018, in part due to higher food prices.\n- Unemployment rate remains close to 10 percent and is particularly high among the youth."
    },
    {
      "heading": "Fiscal developments",
      "content": "- Fiscal consolidation slowed in 2018.\n- Fiscal deficit stabilized at 3.7 percent of GDP in 2018, driven by:\n  - Strong VAT revenues and wage bill containment, which partially offset lower corporate taxes and grants, and higher butane subsidies.\n- Public finance indicators (selected):\n  - Revenue: 28.0, 26.0, 26.6, 26.2 (percent of GDP; table headings imply these correspond to earlier years).\n  - Expenditure: 32.9, 30.7, 30.5, 29.8, 29.9 (percent of GDP; as reported in table).\n  - Budget balance: -5.1, -4.8, -4.2, -4.5, -3.5, -3.7 (percent of GDP).\n  - Primary balance, excluding grants: -3.2, -3.6, -1.9, -2.7, -2.0, -1.7, -1.5 (percent of GDP).\n  - Cyclically-adjusted primary balance, excl. grants: -3.3, -1.6, -2.5, -1.4, -1.3 (percent of GDP).\n  - Total government debt: 61.7, 63.3, 63.7, 64.9, 65.1 (percent of GDP)."
    },
    {
      "heading": "External sector",
      "content": "- Current account deficit widened to 5.4 percent of GDP in 2018 due to:\n  - Higher imports of energy and capital goods.\n  - Lower remittances, official grants, and tourism receipts.\n- Despite the wider current account deficit, net FDI increased substantially to 2.5 percent of GDP.\n- International reserves dropped to US$24.4 billion but remained about 5.2 months of imports.\n- External sector indicators (selected):\n  - Exports of goods, in U.S. dollars, percentage change: 7.4, 9.2, -6.8, 2.4, 12.8, 14.3, 6.6 (annual percent changes listed in table).\n  - Imports of goods, in U.S. dollars, percentage change: -17.9, 10.1, 7.8, 13.3 (annual percent changes listed in table).\n  - Merchandise trade balance: -20.5, -18.7, -14.5, -17.1, -16.4, -15.8 (percent of GDP).\n  - Current account excluding official transfers: -8.3, -7.6, -2.6, -5.0, -5.8, -4.4 (percent of GDP).\n  - Current account including official transfers: -5.9, -2.1, -4.0, -3.4, -5.4 (percent of GDP).\n  - Total external debt: 30.2, 31.0, 33.4, 33.7, 34.5, 31.1, 32.7 (percent of GDP).\n  - Gross reserves, in billions of U.S. dollars: 18.8, 20.3, 22.8, 24.4.\n  - In months of next year imports of goods and services: 4.6, 6.0, 6.1.\n  - Net imports of energy products, in billions of U.S. dollars: -12.2, -11.0, -5.6, -7.2, -8.8, -7.9."
    },
    {
      "heading": "Financial sector and banking",
      "content": "- Bank capitalization is adequate; risks to financial stability are limited.\n- Nonperforming loans remain relatively high but are well provisioned.\n- Regulatory measures being strengthened to reduce credit concentration and enhance cross-border supervisory collaboration related to Moroccan banks’ expansion in Africa.\n- Directors noted the need to address weaknesses in the AML/CFT framework.\n- Adoption of the central bank law and a more risk-based, forward-looking supervisory framework were recommended to further improve financial sector soundness.\n- A comprehensive financial inclusion strategy was recently adopted to better address financing needs of underserved groups and small and medium-sized enterprises."
    },
    {
      "heading": "Outlook and risks",
      "content": "- Morocco’s medium-term prospects remain favorable, with growth expected to reach 4.5 percent by 2024.\n- Downside risks include:\n  - Delays in reform implementation.\n  - Lower growth in key partner countries (particularly the euro area).\n  - Higher oil prices.\n  - Geopolitical risks.\n  - Volatile financial conditions.\n- Upside factors include:\n  - Lower international oil prices could strengthen economic resilience.\n  - Increased regional integration in the Maghreb region could be an added source of medium-term growth."
    },
    {
      "heading": "Executive Board assessment and policy recommendations",
      "content": "- Directors commended authorities for sound macroeconomic policies and acceleration in reforms that improved resilience and diversification.\n- Directors called for continued commitment to sustain sound policies to reach higher and more inclusive growth.\n- Fiscal policy:\n  - Continue fiscal consolidation to preserve debt sustainability while safeguarding priority investment and social spending in the medium term.\n  - Continue control of public wage spending.\n  - Implement comprehensive tax reform informed by the May 2019 national tax conference to achieve greater equity and simplicity.\n  - Improve efficiency and governance of the public sector via civil service reform, careful fiscal decentralization, strengthened state-owned enterprise oversight, and better targeting of social spending.\n- Monetary and exchange rate policy:\n  - Accommodative monetary policy remains appropriate given moderate inflation and subdued economic and credit growth.\n  - Continue transition to greater exchange rate flexibility in a carefully sequenced and well-communicated manner to help absorb external shocks and remain competitive.\n- Structural and labor market policies:\n  - Sustain pace of structural reforms to move toward a more private-sector-led and inclusive growth model while reducing inequalities and protecting the most vulnerable.\n  - Revamp labor market policies and implement education reforms to create job opportunities, especially for women and youth.\n  - Continue efforts to strengthen governance and fight corruption.\n- Financial sector:\n  - Remain vigilant given increasing complexity and cross-border expansion of the banking sector.\n  - Continue to improve AML/CFT framework and adopt central bank law and improved supervisory frameworks."
    },
    {
      "heading": "Selected economic indicators (high-level points from table)",
      "content": "- Real primary GDP: 17.2, -2.2, 11.9, -13.7, 15.4, 3.9, 0.1 (annual percentage changes as listed).\n- Real non-primary GDP: 2.9, 3.4, 3.7, 3.1, 2.8 (annual percentage changes as listed).\n- Consumer prices, end of period: 0.4, 1.6, 0.6, 1.8, 1.9 (percent).\n- Consumer prices, period average: 1.5, 0.7 (percent; as listed).\n- Gross capital formation: 34.7, 32.5, 30.8, 32.6, 33.2, 34.0 (percent of GDP).\n- Nongovernment share of gross capital formation: 29.6, 27.2, 25.3, 26.9, 27.1, 27.8, 29.0 (percent of GDP).\n- Gross national savings: 27.0, 26.5, 28.8, 28.4, 28.9, 30.0, 25.5 (percent of GDP).\n- Claims to the economy (annual percentage change): 5.9, 3.3, 5.2.\n- Broad money (annual percentage change): 6.2, 5.7, 4.7, 5.5, 4.0.\n- Velocity of broad money: 0.9, 0.8.\n- Exports/imports percentage changes and other external indicators reported in table (see External sector bullets above).\n- Memorandum items:\n  - Nominal GDP, in billions of U.S. dollars: 106.8, 110.1, 101.2, 103.3, 109.7, 118.6, 120.7.\n  - Unemployment rate, in percent: 9.9, 9.7, 10.2, 9.8.\n  - Population, millions: 33.8, 34.1, 34.9, 35.2.\n  - Local currency per U.S. dollar, period average: 8.4, 9.4.\n  - Real effective exchange rate, annual average, percentage change: 1.7, -0.3, 2.1, -0.4.\n\nIMF Communications Department, July 16, 2019\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Morocco and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2019/07/16/pr19279-morocco-imf-executive-board-concludes-2019-article-iv-consultation-with-morocco"
    }
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    "Published: July 16, 2019",
    "Real GDP growth reached 3 percent in 2018.",
    "Economic activity weakened in 2018 due to lower growth in the agricultural and tertiary sectors.",
    "Headline inflation reached 1.9 percent in 2018, in part due to higher food prices.",
    "Unemployment rate remains close to 10 percent and is particularly high among the youth.",
    "Fiscal consolidation slowed in 2018.",
    "Fiscal deficit stabilized at 3.7 percent of GDP in 2018, driven by:",
    "Public finance indicators (selected):",
    "Current account deficit widened to 5.4 percent of GDP in 2018 due to:",
    "Despite the wider current account deficit, net FDI increased substantially to 2.5 percent of GDP.",
    "International reserves dropped to US$24.4 billion but remained about 5.2 months of imports.",
    "External sector indicators (selected):",
    "Bank capitalization is adequate; risks to financial stability are limited.",
    "Nonperforming loans remain relatively high but are well provisioned.",
    "Regulatory measures being strengthened to reduce credit concentration and enhance cross-border supervisory collaboration related to Moroccan banks’ expansion in Africa.",
    "Directors noted the need to address weaknesses in the AML/CFT framework.",
    "Adoption of the central bank law and a more risk-based, forward-looking supervisory framework were recommended to further improve financial sector soundness.",
    "A comprehensive financial inclusion strategy was recently adopted to better address financing needs of underserved groups and small and medium-sized enterprises.",
    "Morocco’s medium-term prospects remain favorable, with growth expected to reach 4.5 percent by 2024.",
    "Downside risks include:",
    "Upside factors include:",
    "Directors commended authorities for sound macroeconomic policies and acceleration in reforms that improved resilience and diversification.",
    "Directors called for continued commitment to sustain sound policies to reach higher and more inclusive growth.",
    "Fiscal policy:",
    "Monetary and exchange rate policy:",
    "Structural and labor market policies:",
    "Financial sector:",
    "Real primary GDP: 17.2, -2.2, 11.9, -13.7, 15.4, 3.9, 0.1 (annual percentage changes as listed).",
    "Real non-primary GDP: 2.9, 3.4, 3.7, 3.1, 2.8 (annual percentage changes as listed).",
    "Consumer prices, end of period: 0.4, 1.6, 0.6, 1.8, 1.9 (percent).",
    "Consumer prices, period average: 1.5, 0.7 (percent; as listed).",
    "Gross capital formation: 34.7, 32.5, 30.8, 32.6, 33.2, 34.0 (percent of GDP).",
    "Nongovernment share of gross capital formation: 29.6, 27.2, 25.3, 26.9, 27.1, 27.8, 29.0 (percent of GDP).",
    "Gross national savings: 27.0, 26.5, 28.8, 28.4, 28.9, 30.0, 25.5 (percent of GDP).",
    "Claims to the economy (annual percentage change): 5.9, 3.3, 5.2.",
    "Broad money (annual percentage change): 6.2, 5.7, 4.7, 5.5, 4.0.",
    "Velocity of broad money: 0.9, 0.8.",
    "Exports/imports percentage changes and other external indicators reported in table (see External sector bullets above).",
    "Memorandum items:",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[Morocco and the IMF](http://www.imf.org/external/country/MAR/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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