Morocco
Selected Issues
Author: International Monetary Fund
Publication Date:
07 Oct 2008
eISBN:
9781451824827
Language:
English
Keywords:
ISCR; CR; exchange rate; GDP; Morocco; real GDP growth; debt dynamics; debt gap; sustainability framework; Debt sustainability analysis
Download PDF (3.9 MB)

This Selected Issues paper for Morocco discusses possible fiscal policy anchors, specifically deficit targets, and the sustainability of the resulting fiscal paths. Morocco has made great progress toward fiscal consolidation in recent years, under the combined effect of a strong revenue performance and efforts to tackle expenditure rigidities, notably the wage bill. Morocco’s low social indicators and large infrastructure needs could justify an increase in social spending and public investment. Morocco’s fiscal performance lags that of the better-rated emerging market economies.

Abstract

This Selected Issues paper for Morocco discusses possible fiscal policy anchors, specifically deficit targets, and the sustainability of the resulting fiscal paths. Morocco has made great progress toward fiscal consolidation in recent years, under the combined effect of a strong revenue performance and efforts to tackle expenditure rigidities, notably the wage bill. Morocco’s low social indicators and large infrastructure needs could justify an increase in social spending and public investment. Morocco’s fiscal performance lags that of the better-rated emerging market economies.

I. Medium-Term Fiscal Policy: A Scenario Analysis1

1. Morocco has made great progress toward fiscal consolidation in recent years, under the combined effect of a strong revenue performance and efforts to tackle expenditure rigidities, notably the wage bill. The overall fiscal deficit shrank by more than 4 percentage points of GDP during the last four years, bringing the budget close to balance in 2007.2 However, the overall deficit is projected to widen to 3.5 percent of GDP in 2008, driven by the upward surge in the fiscal cost of Morocco’s universal subsidy scheme following the sharp increase in world commodity and oil prices.3

2. Fiscal policy decisions so far have been mostly discretionary, as there is no explicit goal for fiscal policy. Looking forward, the question of a possible anchor for medium-term fiscal policy is worth exploring. Morocco’s low social indicators and large infrastructure needs could justify an increase in social spending and public investment. Further, some nominal tax rates remain high by international standards, possibly warranting a lowering of some rates. At the same time, the relatively high level of public debt remains a constraining factor, particularly as heightened attractiveness to investors is a key component of Morocco’s strategy of deepening its integration in the global economy.

3. The purpose of this chapter is to discuss possible fiscal policy anchors, specifically deficit targets, and assess the sustainability of the resulting fiscal paths. We explore three different scenarios using three complementary approaches: (a) the Fund’s standard fiscal debt sustainability framework (DSA); (b) stochastic simulations, which allow for the explicit modeling of the uncertainty surrounding projections of the main macroeconomic variables underpinning the scenarios; and (c) comparisons with the projected performance of other emerging market economies.

4. The analysis presented in this chapter has two important caveats. First, it does not enter into a detailed discussion of budget structure—the revenue and expenditure projections underpinning the various scenarios are only meant to illustrate possible ways to attain the budget target. A second, related point, is that the analysis does not explicitly take into account possible feedback effects of fiscal policy on economic variables; however, our stochastic simulations approach allows for feedback of key macroeconomic variables—growth, interest and exchange rates—on the debt path.

5. This chapter is organized as follows: the first section provides an overview of recent public finance developments; the second section discusses the baseline medium-term fiscal scenario, which reflects the staff’s discussions with the Moroccan authorities in the context of the 2008 Article IV consultation. In the third and fourth sections, we explore alternative scenarios: an “unchanged fiscal stance” scenario in which the pace of fiscal consolidation is slower than in the baseline, resulting in a stabilization of the overall deficit around its end-2008 level, and a “faster reforms” scenario, where fiscal policy is anchored by the objective of reaching an average primary surplus of one percentage point of GDP. The fifth section concludes.

A. Morocco’s Public Finances: A Brief Overview

6. Morocco has made major progress in recent years to increase economic growth and strengthen the economy’s resilience to shocks. The gains reflect sound macroeconomic policies and sustained structural reforms, and are reflected in the gradual improvement in living standards and per capita income.

7. The turnaround in the fiscal performance is particularly noteworthy (Figure I.1). At the turn of the century, Morocco’s overall deficit stood at 5.3 percent of GDP, and gross total government debt amounted to three-fourths of GDP.4 In 2007, reflecting a strong improvement in revenue performance and moderate growth in expenditure, the budget was close to balance. Under the combined effect of a prudent fiscal policy and sizeable privatization receipts, the total debt stock had shrunk by 20 percentage points, and now stands at a little over half of GDP. As a result, perceptions of Morocco’s creditworthiness have improved, leading two of the major rating agencies to grant an investment grade rating to Morocco’s latest sovereign bond issue, although Morocco’s rating on long-term foreign currency debt remains one notch below investment grade.

Figure I.1.
Figure I.1.

Fiscal Indicators, 2000 and 2007

(In percentage points)

Citation: IMF Staff Country Reports 2008, 331; 10.5089/9781451824827.002.A001

8. In 2008, soaring world prices for oil and some commodities have drastically altered the budgetary environment. The decision to not pass on the increase in world prices to domestic prices to protect purchasing power has led to a significant increase in spending on subsidies, which could double as a share of GDP to reach about 5 percent at year-end. Reflecting this increase, the overall deficit is projected to widen to 3.5 percent of GDP this year.

9. Morocco’s fiscal performance still lags that of the better-rated emerging market economies. For comparison purposes, we have selected a group of six “peer” emerging market economies (Bulgaria, Croatia, Hungary, Romania, South Africa, and Tunisia), whose average rating by the main rating agencies is just above Morocco’s (i.e., first-notch investment grade on its long-term foreign currency debt). While Morocco’s 2007 budget outcome was better than that of the median of its peers, its debt stock was still higher by some 13 percentage points of GDP (Figure I.2).5

Figure I.2.
Figure I.2.

Morocco and Comparators: Fiscal Indicators, 2007

(In percentage points)

Citation: IMF Staff Country Reports 2008, 331; 10.5089/9781451824827.002.A001

B. Baseline Medium-Term Scenario

10. The baseline medium-term scenario reflects the discussions held with the Moroccan authorities during the 2008 Article IV consultation (Table I.1; and Text Table I.1).6 Key assumptions underpinning the fiscal projections for 2009–13 are as follows:

Table I.1.

Selected Economic Indicators, 2003–10

(Quota: SDR 588 million)

(Population: 31.0 million; 2007)

(Per capita GDP: $2,423; 2007)

(Poverty rate: 9 percent; 2007)

(Main export: textiles, phosphates; 2007)

article image
Sources: Moroccan authorities; and Fund staff estimates.
Text Table I.1.

Baseline Scenario: Summary Indicators

(In percent of GDP)

article image

Includes grants.

Includes balance of special treasury accounts.

• The stabilization of revenue at about 27½ percent of GDP over the medium term, as the impact of continued reform of the three main taxes (personal income tax, corporate income tax, and VAT) offsets the decline in import taxes as the trade regime is further liberalized.

• The main expenditure items are projected as follows: (a) the share of the wage bill in GDP would gradually decline before stabilizing about 10 percent; (b) subsidies-related expenditure would fall from 5 percent of GDP in 2008 to 2.8 percent of GDP at the end of the period, reflecting the gradual unwinding of Morocco’s universal subsidy system starting in 2009; and (c) investment spending would progressively increase to stabilize at about 5 percent of GDP.

• As a result, the primary balance would remain close to zero on average during 2009–13, translating into an overall budget deficit of about 2 percent of GDP at the end of the projection period, while the stock of debt would decrease by about 10 percentage points, reaching 44 percent of GDP in 2013. The deficit would continue to be financed mostly through domestic borrowing, with real domestic interest rates kept at their 2007 level.

11. The Fund’s standard fiscal debt sustainability assessment suggests that the resulting fiscal path would be broadly sustainable (Table I.2 and Panel I.1). These favorable debt dynamics are predicated in part on the significant negative contribution of the real GDP growth rate to the change in public debt. Indeed, standard stress tests suggest that growth shocks are the only shocks susceptible to throw Morocco’s debt off its sustainable path.7

Table I.2.

Public Sector Debt Sustainability Framework, 2003–13

Baseline Scenario

(In percent of GDP, unless otherwise indicated)

article image
Sources: Moroccan authorities; and Fund staff estimates.

Indicate coverage of public sector, e.g., general government or nonfinancial public sector. Also whether net or gross debt is used.

Derived as [(r - π (1+g) - g + as (1+r)]/(1+g+π+gπ)) times previous period debt ratio, with r = interest rate; π = growth rate of GDP deflator; g = real GDP growth rate; α = share of foreign-currency denominated debt; and ε = nominal exchange rate depreciation (measured by increase in local currency value of U.S. dollar).

The real interest rate contribution is derived from the denominator in footnote 2/ as r - π (1+g) and the real growth contribution as -g.

The exchange rate contribution is derived from the numerator in footnote 2/ as αε(l+r).

For projections, this line includes exchange rate changes.

Defined as public sector deficit, plus amortization of medium- and long-term public sector debt, plus short-term debt at end of previous period.

The key variables include real GDP growth; real interest rate; and primary balance in percent of GDP.

Derived as nominal interest expenditure divided by previous period debt stock.

Assumes that key variables (real GDP growth, real interest rate, and other identified debt-creating flows) remain at the level of the last projection year.

Panel I.1.
Panel I.1.

Public Debt Sustainability: Bound Tests 1/

Baseline Scenario

(Public debt in percent of GDP)

Citation: IMF Staff Country Reports 2008, 331; 10.5089/9781451824827.002.A001

Sources: Moroccan authorities; and Fund staff estimates.1/ Shaded areas represent actual data. Individual shocks are permanent one-half standard deviation shocks. Figures in the boxes represent average projections for the respective variables in the baseline and scenario being presented. Ten-year historical average for the variable is also show n.2/ Permanent 1/4 standard deviation shocks applied to real interest rate, growth rate, and primary balance.3/ Assuming that a one-time real depreciation of 30 percent and that a 10 percent of GDP shock to contingent liabilities occur in 2009, with real depreciation defined as nominal depreciation (measured by percentage fall in dollar value of local currency) minus domestic inflation (based on GDP deflator).

12. To further refine our assessment of Morocco’s fiscal path under the baseline scenario, we now turn to an approach which allows us to explicitly model the uncertainty surrounding our macroeconomic projections. As discussed in Celasun, Debrun, and Ostry (2006), such an explicit risk assessment addresses key shortcomings of the standard debt sustainability approach, notably the static and isolated nature of the shocks and their “one-size-fits-all” calibration. The most attractive feature of the approach developed by Celasun et al. is that it produces an explicitly probabilistic output, directly derived from observed comovements among the key macroeconomic determinants of debt dynamics—the domestic and foreign interest rates, the real growth rate, and the effective exchange rate.8 Its diagnostic, based on a large number of random shock constellations drawn from an estimated zero-mean country specific distribution, leads to a more robust and realistic assessment of debt sustainability. However, our approach differs from that of Celasun et al. in one important respect: we assume that fiscal policy does not adjust in response to macroeconomic shocks, i.e., we assume that Morocco’s primary surplus follows the path derived in our fiscal framework. This is equivalent to assuming that Morocco follows a fiscal policy rule, and allows us to focus on the impact on the debt path of shocks to its nonfiscal determinants, calibrated to reflect past observed shocks (for a technical discussion of our results’ derivation, see Annex).

13. The risks to the debt dynamics resulting from simulated shocks to the main macroeconomic determinants of debt are best summarized in a fan chart (Figure I.3). Different colors in the fan chart delineate deciles in the distributions of debt ratios, with the zone in dark grey representing a 20 percent confidence interval around the median projection and the overall cone, a confidence interval of 80 percent. By construction, the simulations’ average outcome is that of the DSA. According to these simulations, at the end of the projection period, the probability that Morocco’s public-debt-to-GDP ratio will be lower than 45 percent is 60 percent; conversely, there is still a 20 percent chance that the ratio will remain higher than 50 percent. However, the chance that the debt path will not be sustainable—i.e., that the debt-to-GDP ratio will increase—is about 10 percent.

Figure I.3.
Figure I.3.

Public Debt Risk Profile, 2003–13

(In percent of GDP)

Baseline Scenario

Citation: IMF Staff Country Reports 2008, 331; 10.5089/9781451824827.002.A001

14. Finally, we assess Morocco’s performance relative to that of its emerging market peers, based on April 2008 World Economic Outlook projections (Figure I.4). Under the baseline scenario, Morocco does not gain any ground on its better-rated emerging market peers. In particular, the “debt gap”—i.e., the differences in the total debt-to-GDP ratios—would remain roughly constant at 13 percentage points at the end of the projection period.

Figure I.4.
Figure I.4.

Morocco and Comparators: Fiscal Indicators, 2013

Baseline Scenario

(In percentage points)

Citation: IMF Staff Country Reports 2008, 331; 10.5089/9781451824827.002.A001

C. Unchanged Fiscal Stance Scenario

15. In our second scenario, we assume a slower pace of fiscal consolidation, translating into a constant overall deficit and an average primary deficit of ½ a percentage point of GDP during 2009–13. This outcome is consistent with a less ambitious subsidies reform and a somewhat faster growth of other current expenditure. As a result, the pace of debt reduction slows, with the projected 2013 debt-to-GDP ratio now at about 47 percent, a six percentage point reduction from its end-2007 level (Text Table I.2).

Text Table I.2.

Unchanged Fiscal Stance Scenario: Summary Indicators

(In percent of GDP)

article image

Includes grants.

Includes balance of special treasury accounts.

16. As expected, the somewhat looser fiscal policy accentuates the vulnerability of Morocco’s public debt to shocks. The debt now appears vulnerable to both the growth and the combined shocks, and its ratio to GDP remains higher than 50 percent in all but the DSA baseline and the historical scenarios (Table I.3 and Panel I.2).

Table I.3.

Public Sector Debt Sustainability Framework, 2003–13

Unchanged Fiscal Stance Scenario

(In percent of GDP, unless otherwise indicated)

article image
Sources: Moroccan authorities; and Fund staff estimates.

Indicate coverage of public sector, e.g., general government or nonfinancial public sector. Also whether net or gross debt is used.

Derived as [(r - π(1 +g) - g + as(1+r)]/(1+g+π+gπ)) times previous period debt ratio, with r = interest rate; 7i = growth rate of GDP deflator; g = real GDP growth rate; a = share of foreign-currency denominated debt; and s = nominal exchange rate depreciation (measured by increase in local currency value of U.S. dollar).

The real interest rate contribution is derived from the denominator in footnote 2/ as r - π(1+g) and the real growth contribution as -g.

The exchange rate contribution is derived from the numerator in footnote 2/ as αε(1+r).

For projections, this line includes exchange rate changes.

Defined as public sector deficit, plus amortization of medium- and long-term public sector debt, plus short-term debt at end of previous period.

The key variables include real GDP growth; real interest rate; and primary balance in percent of GDP.

Derived as nominal interest expenditure divided by previous period debt stock.

Assumes that key variables (real GDP growth, real interest rate, and other identified debt-creating flows) remain at the level of the last projection year.

Panel I.2.
Panel I.2.

Public Debt Sustainability: Bound Tests 1/

Unchanged Fiscal Stance Scenario

(Public debt in percent of GDP)

Citation: IMF Staff Country Reports 2008, 331; 10.5089/9781451824827.002.A001

Sources: Moroccan authorities; and fund estimates1/Shaded areas represent actual data. Individual shocks are permanent one-half standard deviation shocks. Figures in the boxes represent average projections for the respective variables in the baseline and scenario being presented. Ten-year historical average for the variable is also show n.2/ Permanent 1/4 standard deviation shocks applied to real interest rate, growth rate, and primary balance.3/ Assuming that a one-time real depreciation of 30 percent and that a 10 percent of GDP shock to contingent liabilities occur in 2009, with real depreciation defined as nominal depreciation (measured by percentage fall in dollar value of local currency) minus domestic inflation (based on GDP deflator).

17. The stochastic simulation approach also highlights increased debt vulnerabilities. In this scenario, there is about a 30 percent chance that Morocco’s public-debt-to-GDP ratio will remain higher than 50 percent in 2013. Further, the chance of this ratio being higher in 2013 than it is today, implying an unsustainable debt path, is more than 20 percent (Figure I.5).

Figure I.5
Figure I.5

Public Dept Risk Profile, 2003–13

(In percentage of GDP)

Unchanged Fiscal Stance Scenario

Citation: IMF Staff Country Reports 2008, 331; 10.5089/9781451824827.002.A001

18. An unchanged deficit would also further distance Morocco’s fiscal performance from that of its emerging-market peers. The debt gap would widen to 16 percentage points in 2013, while the share of interest payments in revenue would be about twice as high in Morocco as in its median comparator (Figure I.6).

Figure I.6
Figure I.6

Morocco and Comparators: Fiscal Indicators, 2013

Unchanged Fiscal Stance Scenario

(In percentage points)

Citation: IMF Staff Country Reports 2008, 331; 10.5089/9781451824827.002.A001

D. Faster Reforms Scenario

19. Lastly, we examine the impact of a more ambitious fiscal consolidation scenario, by projecting an average primary surplus of one percent of GDP over 2009–13. This would be achieved through further streamlining of current expenditure, and a deeper reform of the subsidies system. As a result, the public-debt-to-GDP ratio would decline by 14 percent from its end-2007 level, reaching about 40 percent at the end of the projection period (Text Table I.3).

Text Table I.3.

Faster Reforms Scenario: Summary Indicators

(In percent of GDP)

article image

Includes grants.

Includes balance of special treasury accounts.

20. The Fund’s standard debt sustainability analysis indicates that, in this scenario, Morocco’s public debt would pass all stress tests, and would remain sustainable even in the event of a small permanent shock to growth (Table I.5 and Panel I.3).

Panel I.3.
Panel I.3.

Public Debt Sustainability: Bound Tests 1/

Faster Reforms Scenario

(Public debt in percent of GDP)

Citation: IMF Staff Country Reports 2008, 331; 10.5089/9781451824827.002.A001

Sources: Moroccan authorities; and Fund staff estimates.1/Shaded areas represent actual data. Individual shocks are permanent one-half standard deviation shocks. Figures in the boxes represent average projections for the respective variables in the baseline and scenario being presented. Ten-year historical average for the variable is also show n.2/ Permanent 1/4 standard deviation shocks applied to real interest rate, growth rate, and primary balance.3/ Assuming that a one-time real depreciation of 30 percent and that a 10 percent of GDP shock to contingent liabilities occur in 2009, with real depreciation defined as nominal depreciation (measured by percentage f all in dollar value of local currency) minus domestic inflation (based on GDP deflator).

21. The stochastic simulation analysis reflects the increased robustness of the debt indicators. The probability that the debt-to-GDP ratio remains higher than 50 percent in 2013 is now less than 10 percent, and the probability that macroeconomic disturbances throw the debt off of its sustainable path is almost null (Figure I.7).

Figure I.7
Figure I.7

Public Debt Risk Profile, 2003–13

(In percent of GDP)

Faster Reforms Scenario

Citation: IMF Staff Country Reports 2008, 331; 10.5089/9781451824827.002.A001

22. Achieving a small primary surplus would also enable Morocco to improve its performance relative to its peers (Figure I.8). In particular, in this scenario, Morocco is able to reduce its public debt burden faster than its better-rated peer, reducing its debt gap to less than 10 percent in 2013.

Figure I.8
Figure I.8

Morocco and Comparators: Fiscal Indicators, 2013

Faster Reforms Scenario

(In percentage points)

Citation: IMF Staff Country Reports 2008, 331; 10.5089/9781451824827.002.A001

E. Conclusion

23. We have examined three different policy scenarios. Our conclusions are that, under the authorities’ current medium-term fiscal scenario, Morocco’s debt, while declining, would still be vulnerable to growth shocks, and would remain significantly higher than that of better-rated emerging market economies in the medium term. Further slowing down the pace of fiscal consolidation—for example because of delays in implementing subsidy reform—would exacerbate these vulnerabilities markedly, and increase the debt gap between Morocco and its peers. To preserve the gains of fiscal consolidation and enable Morocco’s public finances to weather most plausible shocks, the authorities should persevere in the fiscal consolidation efforts of recent years, for example by anchoring medium-term fiscal policy on a small primary surplus (1 percent of GDP). This would also offer the added benefit of maintaining Morocco’s debt-to-GDP ratio on its downward trend, thus bringing it closer to levels observed in better-rated emerging market economies.

Table I.4.

Public Sector Debt Sustainability Framework, 2003–13

Faster Reforms Scenario

(In percent of GDP, unless otherwise indicated)

article image
Sources: Moroccan authorities; and Fund staff estimates.

Indicate coverage of public sector, e.g., general government or nonfinancial public sector. Also whether net or gross debt is used.

Derived as [(r - π (1+g) - g + αε (1+r)]/(1+g+π+gπ)) times previous period debt ratio, with r = interest rate; α = growth rate of GDP deflator; g = real GDP growth rate; a = share of foreign-currency denominated debt; and ε = nominal exchange rate depreciation (measured by increase in local currency value of U.S. dollar).

The real interest rate contribution is derived from the denominator in footnote 2/ as r - π (1+g) and the real growth contribution as -g.

The exchange rate contribution is derived from the numerator in footnote 2/ as αε (1+r).

For projections, this line includes exchange rate changes.

Defined as public sector deficit, plus amortization of medium- and long-term public sector debt, plus short-term debt at end of previous period.

The key variables include real GDP growth; real interest rate; and primary balance in percent of GDP.

Derived as nominal interest expenditure divided by previous period debt stock.

Assumes that key variables (real GDP growth, real interest rate, and other identified debt-creating flows) remain at the level of the last projection year.

Annex Technical Derivation of Stochastic Simulations Results

The debt path is estimated in two steps.

First, an unrestricted VAR of the nonfiscal determinants of public debt dynamics is estimated using quarterly Moroccan data for the period 1996–2007. Formally, the VAR takes the form:

Yt⁢ = γ0⁢ + Σk=1p⁢γk⁢Yt−k⁢  +ξt

where Yt = (r;us rt, gt, zt) and γk is a vector of coefficients, rus is the real foreign interest rate, r the real domestic interest rate, g the real growth rate, z the (log of) the real effective exchange rate, and ξ is a vector of well-behaved error terms: ξt ~ N(0,Ω).

This model serves two purposes. First, the variance-covariance matrix of residuals Q characterizes the joint statistical properties of the contemporaneous, nonfiscal disturbances affecting debt dynamics. Specifically, the simulations use a sequence of random vectors ξ^t+1,…,ξ^T such that ∀ τ ∈[t⁢ + 1, T],ξ^τ⁢ = Wvt , where vt~N(0,1), and W is such that Ω=W’W (W is the Choleski factorization of Ω). Second, the VAR generates forecasts of Y consistent with the simulated shocks. As shocks occur each period, the VAR produces joint dynamic responses of all elements in Y.

In a second step, we annualize quarterly VAR projections for each simulated constellation of shocks, and calculate the corresponding debt paths by plugging the simulated variables into the conventional stock-flow identity:

dt⁢ =(1⁢ + r t u⁢s)⁢( 1 + Δ⁢zt )⁢ d t−1 *⁢ + ( 1 +  rt)⁢d¯t−1(1⁢+ gt)⁢ -pt , where:

dt* denotes the foreign-currency denominated debt, d˜t the domestic-currency denominated debt, and pt is the primary surplus.

Our simulations are based on 1,000 simulated debt paths corresponding to different shock constellations. We use fan charts to plot the frequency distribution of the debt ratio for each year of the projection period.

1

Prepared by Laurence Allain. The author would like to thank Oya Celasun, Xavier Debrun, and Jonathan Ostry for sharing their stochastic simulations program.

2

This is the deficit on a commitment basis, excluding grants.

3

The key subsidized products are bread, sugar, petroleum products, and cooking gas.

4

Throughout this chapter, public debt refers to the gross debt of the central government.

5

However, Morocco’s deficit is projected to be higher than its median comparator’s in 2008.

6

For more details on the discussions, see IMF Country Report No. 08/304.

7

These tests assume small, permanent shocks to the key debt determinants of ½ the standard deviation of the last decade, or a combined shock of ¼ of the standard deviation.

8

For an in-depth discussion of this approach, see Celasun, Debrun, and Ostry (2006).

References

  • Celasun, Debrun, and Ostry: “Primary Surplus Behavior and Risks to Fiscal Sustainability in Emerging Market Countries: A “Fan Chart” Approach”, IMF Staff Papers, Volume 53, Number 3, December 2006

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  • Di Bella, Gabriel, Mark Lewis, and Aurélie Martin, 2007, “Assessing Competitiveness and Real Exchange Rate Misalignment in Low-Income Countries”, IMF Working Paper WP/07/201 (Washington: International Monetary Fund).

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  • Lane, Philip, and Gian Maria Milesi-Ferretti, 2006, “The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970–2004,” IMF Working Paper 06/69 (Washington: International Monetary Fund).

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  • Lee, Jaewoo, G.M. Milesi-Ferretti, Jonathan Ostry, Alessandro Pratti, and Luca A. Ricci, 2008, “Exchange Rate Assessments: CGER Methodologies,” IMF Occasional Paper No. 261 (Washington: International Monetary Fund).

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  • UN Comtrade, available at http://comtrade.un.org

  • Wacziarg, Romain, and Karen H. Welch, 2003 “Trade Liberalization and Growth: New Evidence,” NBER Working Paper 10152 (Cambridge, Massachusetts: National Bureau of Economic Research).

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1

Prepared by Randa Sab, Gabriel Sensenbrenner, and Mame Astou Diouf.

2

For details, see J. Lee, and others (2008), which includes morocco in the sample of countries analyzed.

3

Other sources include the United nations for demographics variables; lane and others (2006), for net foreign assets; and wacziarg and Welch (2003) for the trade restriction index.

4

The NFA series drawn respectively from the Lane and Milesi-Ferreti (2006) database and morocco’s office des changes international investment position yield broadly similar results.

5

The elasticity is calculated as: (export elasticity) x (export/GDP)–(import elasticity–1) x (import/GDP), applying common export and import elasticities used in the CGER exercise (-0.71 and 0.92, respectively), and Morocco’s exports and import shares to GDP. The more open to trade a country is, the less adjustment is required of the real effective exchange rate to close any gap in the current account.

6

Inflation in advanced economies would yield similar results.

7

Administered prices account for about 20 percent of the consumer price index. These have not been adjusted since early 2007, helping to depress inflation since that time.

8

Morocco has gained market shares in services since 2000.

9

The data are from UN Comtrade.

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Cover IMF Staff Country Reports
Morocco: Selected Issues
Author: International Monetary Fund
Volume/Issue:
Volume 2008: Issue 331
Publisher:
International Monetary Fund
ISBN:
9781451824827
ISSN:
1934-7685
Pages:
33
DOI:
https://doi.org/10.5089/9781451824827.002