IMF Executive Board Concludes 2020 Article IV Consultation with Morocco

IMF News, December 23, 2020

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Canonical URL: IMF Executive Board Concludes 2020 Article IV Consultation with Morocco

Executive Board concluded the Article IV consultation with Morocco on December 18 (announcement dated December 23, 2020).
Morocco was hit by the global pandemic and a severe drought in 2020; authorities mounted a prompt policy response, including voluntary private and public contributions to the Covid-19 Fund.
Precautionary and Liquidity Line (PLL) purchase in April 2020 eased external financing pressures; authorities intend to repurchase part of the amount purchased under the PLL arrangement soon.

Real GDP growth:
- IMF staff expects GDP growth to fall to -7.2 percent in 2020 and rebound to 4.5 percent in 2021.
Labor market:
- Unemployment increased to 12.7 percent in the third quarter of 2020 (from 9.4 percent last year).
- Table projection: Unemployment (%): 2017: 10.2; 2018: 9.8; 2019: 9.2; 2020: 12.5; 2021: 10.5; 2022: 9.7; 2023: 9.1; 2024: 8.7; 2025: 8.5.
Inflation:
- Inflation has been driven lower so far in 2020.
- Table (end of period inflation): 2017: 1.7; 2018: 0.1; 2019: 1.0; 2020: 0.2; 2021: 0.8; 2022: 1.2; 2023: 1.6; 2024: 1.8; 2025: 2.0.

Deterioration of the fiscal position in 2020 mainly driven by the fall in tax revenues and greater public sector spending financed by the Covid-19 Fund contributions.
Fiscal aggregates (central government, include grants):
- Revenue (% GDP): 2017: 26.6; 2018: 26.1; 2019: 25.6; 2020: 26.9; 2021: 26.2; 2022: 26.4; 2023: 26.8; 2024: 27.2.
- Expenditure (% GDP): 2017: 30.1; 2018: 29.9; 2019: 29.7; 2020: 34.6; 2021: 32.6; 2022: 32.7; 2023: 32.2; 2024: 31.7; 2025: 31.3.
- Fiscal balance (% GDP): 2017: -3.5; 2018: -3.7; 2019: -4.1; 2020: -7.7; 2021: -6.3; 2022: -6.2; 2023: -5.6; 2024: -4.8; 2025: -4.0.
- Primary balance: 2017: -2.0; 2018: -1.7; 2019: -1.8; 2020: -5.5; 2021: -3.9; 2022: -2.8; 2023: -2.1; 2024: -1.2.
- Public debt (% GDP): 2017: 65.1; 2018: 65.2; 2019: 76.5; 2020: 76.9; 2021: 77.3; 2022: 77.7; 2023: 76.6.
Directors’ guidance on fiscal policy:
- Fiscal policy appropriately supported households and firms in the wake of the pandemic and should continue to sustain the recovery in the short term.
- Fiscal consolidation should resume as soon as the economy recovers.
- Authorities encouraged to publish a medium-term fiscal framework to show a credible commitment to put public debt on a firmly downward trajectory.
- Further reforms urged to improve tax policy and increase the efficiency of public spending.
- Strengthen management and reporting of fiscal risks related to credit guarantees and public-private partnerships.

Current account:
- Current account excluding official transfers (% GDP): 2017: -4.5; 2018: -4.3; 2019: -6.7; 2020: -5.8; 2021: -5.1; 2022: -4.6; 2023: -3.8.
- Current account including official transfers (% GDP): 2017: -3.4; 2018: -5.3; 2019: -6.0; 2020: -5.4; 2021: -4.4.
Trade and external receipts:
- Exports of goods (U.S. dollars, % change): 2017: 12.8; 2018: 14.5; 2019: -18.4; 2020: 15.1; 2021: 7.7; 2022: 6.6; 2023: 6.8.
- Imports of goods (U.S. dollars, % change): 2017: 7.8; 2018: 13.5; 2019: -0.5; 2020: -18.0; 2021: 14.4; 2022: 7.4; 2023: 6.0; 2024: 6.2; 2025: 6.3.
- Merchandise trade balance (% GDP): 2017: -16.5; 2018: -17.2; 2019: -16.7; 2020: -14.6; 2021: -15.1; 2022: -14.8.
Reserves and external debt:
- Gross reserves (months imports, as of 2009 reserves include the new SDR allocation): 2017: 5.7; 2018: 5.3; 2019: 7.3; 2020: 6.9; 2021: 6.7; 2022: 6.5.
- External Debt (% GDP): 2017: 35.0; 2018: 32.0; 2019: 32.8; 2020: 39.7; 2021: 39.3; 2022: 39.9; 2023: 39.0; 2024: 39.1.
Remittances and imports: resilience of remittances and lower imports have contained external financing needs despite lower tourism receipts.

Central bank response:
- Bank Al-Maghreb improved liquidity conditions and cut interest rates; measures smoothed pandemic impact on financial markets and the real economy.
- Monetary policy should remain accommodative until inflationary pressures reemerge.
- Progress in increasing exchange rate flexibility welcomed; completion of transition to planned inflation targeting framework recommended to strengthen monetary policy transmission.
Banking sector:
- Banks have so far weathered the recession relatively well and credit continued to increase in 2020, reflecting central bank measures and government guaranteed credit schemes.
- Directors recommended continued close monitoring of bank asset quality, including regular stress testing.
- Calls to accelerate efforts to strengthen the AML/CFT framework and finalize the bank resolution framework.

State-owned enterprises:
- Directors supported authorities’ plan to overhaul large state-owned enterprises to improve efficiency and governance, and to support private sector development.
Governance and public sector:
- Continued efforts welcomed to improve governance, modernize public sector administration, and fight corruption.
Social protection and human capital:
- Authorities committed to extend social protection to expand coverage, make access to benefits more equitable, and improve targeting and efficiency of spending.
- Given limited fiscal space, need to ensure adequate long-term financing for social protection reforms.
- Education reforms underscored as critical to build human capital and improve long-term productivity.

Population: 35.587 million; 2019
Per capita GDP: $3,460; 2019
Quota: SDR 894.4 million
Poverty rate: 4.8 percent, 2014
Main exports: automobiles, phosphate and derivatives; 2018
Key export markets: France and Spain (37% of total trade), 2018
Nominal GDP (in billions of U.S. dollars): 2017: 109.7; 2018: 118.1; 2019: 119.7; 2020: 113.0; 2021: 124.2; 2022: 131.1; 2023: 138.2; 2024: 145.7; 2025: 153.8
Net imports of energy products (in billions of U.S. dollars): 2017: -8.8; 2018: -7.9; 2019: -5.0; 2020: -5.2; 2021: -5.9
Local currency per U.S. dollar (period average): 2017: 9.4; 2018: 9.6; 2019: 9.5; 2020: 9.0

IMF press release “IMF Executive Board Concludes 2020 Article IV Consultation with Morocco,” December 23, 2020.