Statement by the IMF Staff Representative

The macroeconomic environment is sound, with low inflation and a comfortable external position, although the fiscal position remains a concern for the medium term. The authorities have successfully privatized and liberalized the telecommunications, energy, and transportation sectors. Moreover, Morocco has significantly liberalized its trade regime and strengthened its financial sector. These reforms have enhanced the overall productivity of the economy and heightened its resilience to shocks. The medium-term outlook is favorable. The government debt-to-GDP ratio has declined steadily since the turn of the century.

Abstract

The macroeconomic environment is sound, with low inflation and a comfortable external position, although the fiscal position remains a concern for the medium term. The authorities have successfully privatized and liberalized the telecommunications, energy, and transportation sectors. Moreover, Morocco has significantly liberalized its trade regime and strengthened its financial sector. These reforms have enhanced the overall productivity of the economy and heightened its resilience to shocks. The medium-term outlook is favorable. The government debt-to-GDP ratio has declined steadily since the turn of the century.

1. This statement provides additional information that has become available since the circulation of the staff report. It does not change the thrust of the staff appraisal.

2. Recent data suggest that the economic recovery is gaining momentum. At end-June, real GDP had grown by 8.5 percent year-on-year, boosted by a good harvest and robust non-agricultural growth. The external position continues to strengthen. International reserves reached $19.8 billion at end-August, up from $16 billion at end 2005, significantly higher than projected. Preliminary data point to higher-than-anticipated tourism receipts as one of the main factors behind this surge. The trade balance remains in line with staff projections; in particular, Morocco’s main exports, textiles, continue to recover from their 2005 decline in the wake of the end of the Agreement on Textiles and Clothing. The recent strengthening of the revenue performance, which may lead to a more favorable fiscal outcome for the year as a whole, underscores the strength of the recovery. Investment and domestic demand are also picking up, reflecting increased private sector confidence in the Moroccan economy. The overall unemployment rate dropped to 7.7 percent in the second quarter of 2006, its lowest level in more than two decades. Inflationary pressures remain contained, with average inflation reaching 2.4 percent year-on-year at end-August.

3. On September 2, 2006, the authorities increased the retail price of petroleum products by about 5 percent on average. The authorities estimate the international price level at which domestic retail prices would no longer be subsidized at $60 per barrel, up from $56 before this latest increase.

Morocco: 2006 Article IV Consultation—Staff Report; Staff Statement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Morocco
Author: International Monetary Fund