Abstract
IMF Country Report No. 23/42
Copyright Page
IMF Country Report No. 23/42
MOROCCO
2022 ARTICLE IV CONSULTATION—PRESS RELEASE AND STAFF REPORT
January 2023
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2022 Article IV consultation with Morocco, the following documents have been released and are included in this package:
A Press Release.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on January 17, 2023, following discussions that ended on November 4, 2022, with the officials of Morocco on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on December 16, 2022.
An Informational Annex prepared by the IMF staff.
A Statement by the IMF Staff Representative.
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
International Monetary Fund • Publication Services
PO Box 92780 • Washington, D.C. 20090
Telephone: (202) 623–7430 • Fax: (202) 623–7201
E-mail: publications@imf.org Web: http://www.imf.org
Price: $18.00 per printed copy
International Monetary Fund
Washington, D.C.
© 2023 International Monetary Fund
Press Release
PR23/27
IMF Executive Board Concludes 2022 Article IV Consultation with Morocco
FOR IMMEDIATE RELEASE
Washington DC – January 17, 2023: On January 17, 2023, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Morocco.
The drought and economic fallout from Russia’s war in Ukraine took a toll on Morocco’s economy in 2022, despite the authorities’ very strong policy response. After a strong 7.9 percent rebound in 2021, economic activity is expected to slow to 1¼ percent this year, on account of the slump in agricultural output, worsening external conditions, and reduced disposable income. Rising food and energy prices fueled inflationary pressures, which have become more broad-based, with headline inflation expected to peak at 6.5 percent on average in 2022. The negative terms of trade shock from higher international commodity prices widened the trade deficit but strong tourism revenues and remittances partly offset the negative impact on the current account, and international reserves remain at comfortable levels.
Despite the increase in current spending from higher subsidies and other policy measures that mitigated the economic impact of the shocks, the overall fiscal deficit is projected to fall in 2022, This reflects strong performance of both tax (mainly corporate income and VAT) and not-tax (dividends from SOEs) revenues. The central government debt-to-GDP ratio is projected at about 69 percent by end 2022, significantly below the level projected at the time of the 2021 AIV Staff Report, mainly owing to the upward revision of GDP following the change in base year.
GDP growth is projected to accelerate to 3 percent in 2023, mainly driven by the rebound in agricultural output and its positive spillovers to the rest of the economy. Inflation is forecast to gradually decline to about 4 percent in 2023, as the commodity price shock gradually dissipates, and the monetary stance becomes less accommodative. The current account deficit is projected to narrow towards its norm of around 3 percent of GDP in the medium term, boosted by structural reforms. The baseline projections are subject to unusually high uncertainty, mostly related to a worsening of global conditions and greater fallout from Russia’s war in Ukraine.
Executive Board Assessment2
Executive Directors agreed with the thrust of the staff appraisal. They commended the authorities for the very strong policy response that has mitigated the social and economic impact of the recent negative shocks. While risks to the economic outlook are tilted to the downside, continued strong policies and a rapid implementation of reforms would support economic activity going forward. Looking ahead, they supported continued strong Fund engagement.
Directors welcomed monetary policy tightening in 2022 and supported additional data-dependent policy rate increases as needed to contain inflationary pressures. Directors encouraged the central bank to continue the transition to an inflation-targeting framework once inflation declines and the current uncertainty dissipates.
Directors supported the 2023 Budget, which strikes a balance between the needs to reduce the deficit, mitigate the social and economic impact of shocks, and finance structural reforms. They considered that further tax and spending measures would be needed to accelerate the reduction of public debt and rebuild fiscal buffers. Directors welcomed the publication of the three-year fiscal plan, which reinforces Morocco’s already strong institutional fiscal framework. Going forward, the introduction of a fiscal rule based on a debt anchor would further enhance the credibility and transparency of fiscal policy.
Directors welcomed Morocco’s progress in improving its financial supervisory and regulatory framework. They praised the authorities’ completion of the Action Plan designed with FATF, which should support progress toward exiting the FATF grey list. While systemic risks to the financial system appear to be limited, Directors emphasized that it remains essential to continue monitoring financial institutions’ balance sheet exposures, including to climate-related risks.
Directors commended the authorities’ strong commitment to implement comprehensive structural reforms. The reform of the social protection, health, and education systems would improve fairness and quality of access, better target spending, and sustain human capital in the long run. SOE reforms and other initiatives to stimulate private investment would boost private sector growth. Directors stressed that continued efforts to reduce dependance on fossil fuels, address water scarcity, and reduce gender inequality are all essential to bolster Morocco’s potential growth.
It is expected that the next Article IV consultation with Morocco will be held on the standard 12-month cycle.
Morocco: Selected Macroeconomic Indicators, 2017–27
Include grants.
Includes credit to public enterprises.
Morocco: Selected Macroeconomic Indicators, 2017–27
| Population: 36.31 million; 2021 | Per capita GDP: $3,853; 2021 |
| Quota: SDR 894.4 million | Poverty rate: 4.8 percent; 2013 |
| Main exports: automobiles, phosphate and derivatives; 2021 | |
| Key export markets: France and Spain (44% of total trade); 2021 |
| 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | |||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Est. | Proj. | Proj. | Proj. | Proj. | Proj. | ||||||||
| Output (annual percent change) | |||||||||||||
| Real GDP growth | 5.1 | 3.1 | 2.9 | -7.2 | 7.9 | 1.2 | 3.0 | 3.1 | 3.1 | 3.2 | 3.4 | ||
| Real nonagricultural GDP growth | 3.5 | 2.8 | 3.8 | -7.1 | 6.9 | 2.9 | 2.1 | 3.1 | 3.1 | 3.3 | 3.4 | ||
| Employment (percent) | |||||||||||||
| Unemployment | 10.6 | 9.4 | 10.2 | 12.2 | 11.9 | 11.1 | 10.7 | 10.2 | 9.8 | 9.3 | 9.2 | ||
| Prices | |||||||||||||
| Inflation (end of period) | 1.7 | 0.1 | 1.0 | -0.9 | 3.2 | 7.0 | 3.4 | 2.5 | 2.4 | 2.0 | 2.0 | ||
| Inflation (period average) | 0.7 | 1.6 | 0.2 | 0.7 | 1.4 | 6.5 | 4.1 | 2.5 | 2.4 | 2.0 | 2.0 | ||
| Central government finances (percent of GDP) 1/ | |||||||||||||
| Revenue | 24.6 | 24.2 | 23.8 | 27.0 | 25.1 | 26.9 | 26.9 | 26.8 | 26.5 | 26.5 | 26.6 | ||
| Expenditure | 27.8 | 27.7 | 27.4 | 34.1 | 31.0 | 32.2 | 31.8 | 31.1 | 30.3 | 29.8 | 29.5 | ||
| Fiscal balance | -3.2 | -3.4 | -3.6 | -7.1 | -5.9 | -5.3 | -4.9 | -4.4 | -3.8 | -3.3 | -2.9 | ||
| Public debt | 60.3 | 60.5 | 60.3 | 72.2 | 68.9 | 69.2 | 69.0 | 69.3 | 69.0 | 68.5 | 67.5 | ||
| Money and credit (annual percent change) | |||||||||||||
| Broad money | 5.5 | 4.1 | 3.8 | 8.4 | 5.1 | 4.2 | 4.3 | 4.5 | 4.6 | 4.6 | 4.8 | ||
| Claims to the economy 2/ | 3.3 | 3.4 | 5.6 | 4.8 | 4.0 | 5.3 | 3.8 | 4.0 | 4.0 | 4.2 | 4.5 | ||
| Balance of payments | |||||||||||||
| Current account including official transfers (percent of GDP) | -3.2 | -4.9 | -3.4 | -1.2 | -2.3 | -4.3 | -3.8 | -3.5 | -3.2 | -3.1 | -3.1 | ||
| Exports of goods (in U.S. dollars, annual percent change) | 12.8 | 14.5 | 0.3 | -4.4 | 34.1 | 13.8 | -1.2 | 5.3 | 4.6 | 5.6 | 5.6 | ||
| Imports of goods (in U.S. dollars, annual percent change) | 7.8 | 13.5 | -0.9 | -12.0 | 31.7 | 22.3 | -5.5 | 4.0 | 4.0 | 4.9 | 5.2 | ||
| Merchandise trade balance (percent of GDP) | -15.2 | -15.9 | -15.3 | -12.8 | -13.9 | -19.6 | -17.3 | -16.8 | -16.3 | -16.1 | -16.0 | ||
| FDI (percent of GDP) | 1.4 | 2.2 | 0.6 | 0.8 | 1.2 | 1.5 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | ||
| Gross reserves (months of imports) | 5.7 | 5.4 | 6.9 | 7.2 | 5.8 | 5.5 | 5.4 | 5.3 | 5.4 | 5.5 | 5.4 | ||
| External Debt (percent of GDP) | 44.2 | 40.5 | 42.5 | 54.1 | 45.4 | 40.7 | 42.8 | 42.6 | 43.2 | 43.3 | 43.0 | ||
| Exchange rate | |||||||||||||
| REER (annual average, percent change) | -0.3 | 0.8 | 0.8 | 0.7 | 0.7 | ... | ... | ... | ... | ... | ... | ||
| Memorandum Items: | |||||||||||||
| Nominal GDP (in billions of U.S. dollars) | 118.5 | 127.3 | 128.9 | 121.3 | 142.9 | 138.0 | 138.1 | 145.9 | 154.1 | 162.3 | 171.1 | ||
| Net imports of energy products (in billions of U.S. dollars) | -7.2 | -8.8 | -7.9 | -5.3 | -8.4 | -14.0 | -12.3 | -11.6 | -11.2 | -11.1 | -11.1 | ||
| Local currency per U.S. dollar (period average) | 9.7 | 9.4 | 9.6 | 9.5 | 9.0 | ... | ... | ... | ... | ... | ... | ||
Include grants.
Includes credit to public enterprises.
Morocco: Selected Macroeconomic Indicators, 2017–27
| Population: 36.31 million; 2021 | Per capita GDP: $3,853; 2021 |
| Quota: SDR 894.4 million | Poverty rate: 4.8 percent; 2013 |
| Main exports: automobiles, phosphate and derivatives; 2021 | |
| Key export markets: France and Spain (44% of total trade); 2021 |
| 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | |||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Est. | Proj. | Proj. | Proj. | Proj. | Proj. | ||||||||
| Output (annual percent change) | |||||||||||||
| Real GDP growth | 5.1 | 3.1 | 2.9 | -7.2 | 7.9 | 1.2 | 3.0 | 3.1 | 3.1 | 3.2 | 3.4 | ||
| Real nonagricultural GDP growth | 3.5 | 2.8 | 3.8 | -7.1 | 6.9 | 2.9 | 2.1 | 3.1 | 3.1 | 3.3 | 3.4 | ||
| Employment (percent) | |||||||||||||
| Unemployment | 10.6 | 9.4 | 10.2 | 12.2 | 11.9 | 11.1 | 10.7 | 10.2 | 9.8 | 9.3 | 9.2 | ||
| Prices | |||||||||||||
| Inflation (end of period) | 1.7 | 0.1 | 1.0 | -0.9 | 3.2 | 7.0 | 3.4 | 2.5 | 2.4 | 2.0 | 2.0 | ||
| Inflation (period average) | 0.7 | 1.6 | 0.2 | 0.7 | 1.4 | 6.5 | 4.1 | 2.5 | 2.4 | 2.0 | 2.0 | ||
| Central government finances (percent of GDP) 1/ | |||||||||||||
| Revenue | 24.6 | 24.2 | 23.8 | 27.0 | 25.1 | 26.9 | 26.9 | 26.8 | 26.5 | 26.5 | 26.6 | ||
| Expenditure | 27.8 | 27.7 | 27.4 | 34.1 | 31.0 | 32.2 | 31.8 | 31.1 | 30.3 | 29.8 | 29.5 | ||
| Fiscal balance | -3.2 | -3.4 | -3.6 | -7.1 | -5.9 | -5.3 | -4.9 | -4.4 | -3.8 | -3.3 | -2.9 | ||
| Public debt | 60.3 | 60.5 | 60.3 | 72.2 | 68.9 | 69.2 | 69.0 | 69.3 | 69.0 | 68.5 | 67.5 | ||
| Money and credit (annual percent change) | |||||||||||||
| Broad money | 5.5 | 4.1 | 3.8 | 8.4 | 5.1 | 4.2 | 4.3 | 4.5 | 4.6 | 4.6 | 4.8 | ||
| Claims to the economy 2/ | 3.3 | 3.4 | 5.6 | 4.8 | 4.0 | 5.3 | 3.8 | 4.0 | 4.0 | 4.2 | 4.5 | ||
| Balance of payments | |||||||||||||
| Current account including official transfers (percent of GDP) | -3.2 | -4.9 | -3.4 | -1.2 | -2.3 | -4.3 | -3.8 | -3.5 | -3.2 | -3.1 | -3.1 | ||
| Exports of goods (in U.S. dollars, annual percent change) | 12.8 | 14.5 | 0.3 | -4.4 | 34.1 | 13.8 | -1.2 | 5.3 | 4.6 | 5.6 | 5.6 | ||
| Imports of goods (in U.S. dollars, annual percent change) | 7.8 | 13.5 | -0.9 | -12.0 | 31.7 | 22.3 | -5.5 | 4.0 | 4.0 | 4.9 | 5.2 | ||
| Merchandise trade balance (percent of GDP) | -15.2 | -15.9 | -15.3 | -12.8 | -13.9 | -19.6 | -17.3 | -16.8 | -16.3 | -16.1 | -16.0 | ||
| FDI (percent of GDP) | 1.4 | 2.2 | 0.6 | 0.8 | 1.2 | 1.5 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | ||
| Gross reserves (months of imports) | 5.7 | 5.4 | 6.9 | 7.2 | 5.8 | 5.5 | 5.4 | 5.3 | 5.4 | 5.5 | 5.4 | ||
| External Debt (percent of GDP) | 44.2 | 40.5 | 42.5 | 54.1 | 45.4 | 40.7 | 42.8 | 42.6 | 43.2 | 43.3 | 43.0 | ||
| Exchange rate | |||||||||||||
| REER (annual average, percent change) | -0.3 | 0.8 | 0.8 | 0.7 | 0.7 | ... | ... | ... | ... | ... | ... | ||
| Memorandum Items: | |||||||||||||
| Nominal GDP (in billions of U.S. dollars) | 118.5 | 127.3 | 128.9 | 121.3 | 142.9 | 138.0 | 138.1 | 145.9 | 154.1 | 162.3 | 171.1 | ||
| Net imports of energy products (in billions of U.S. dollars) | -7.2 | -8.8 | -7.9 | -5.3 | -8.4 | -14.0 | -12.3 | -11.6 | -11.2 | -11.1 | -11.1 | ||
| Local currency per U.S. dollar (period average) | 9.7 | 9.4 | 9.6 | 9.5 | 9.0 | ... | ... | ... | ... | ... | ... | ||
Include grants.
Includes credit to public enterprises.
Title page
MOROCCO
STAFF REPORT FOR THE 2022 ARTICLE IV CONSULTATION
December 16, 202 2
KEY ISSUES
Economic context: Despite the authorities’ very strong policy response, another drought and the economic spillovers from Russia’s invasion of Ukraine have taken a toll on Morocco’s economy and ignited inflationary pressures. Assuming a return to normal agricultural seasons, stabilization of external economic conditions, and continued progress on the authorities’ rich structural reform agenda, economic activity should rebound in 2023 and stabilize around 3½ percent over the medium term. Inflation is projected to have peaked in 2022 and to start falling in 2023 as the commodity price shock dissipates and the central bank reduces monetary policy accommodation. The negative terms-of-trade shock widened the trade deficit in 2022, but Morocco’s external position is projected to improve from 2023 onwards, also thanks to strong remittances and tourism inflows.
Main policy challenges: Fiscal policy needs to strike a delicate balance between rebuilding buffers, mitigating the lingering economic and social impact of recent shocks, and financing the much-needed structural reforms. The 2023 Budget contains measures that significantly contribute to achieving all these objectives, but there is room for more efforts to increase revenues and rationalize spending, which would allow a faster reduction of public debt in the medium term. While Bank Al-Maghrib has appropriately raised interest rates in 2022, further increases are required to bring inflation back to 2 percent over the next two years. Preparation should continue for a swift transition to an IT regime after inflation returns to lower levels and current exceptional uncertainty on the domestic and global economic outlooks dissipates.
Structural reforms: Limited fiscal and monetary policy space and high uncertainty call for accelerating structural reforms to strengthen the resilience of Morocco’s economy. Significant progress has been achieved in a number of areas, with reforms that have the potential to boost domestic demand and increase Morocco’s growth potential over the medium term. Important steps have been made toward expanding social protection to all Moroccans and better targeting assistance through the introduction of a Unified Social Registry. Far-reaching reforms in both health and education systems have been designed that should improve access, efficiency, and quality of services, bolstering human capital over the medium to long term. The reform of SOEs, together with the operationalization of the Mohammed VI Fund and the implementation of the new Charter of Investment, should help stimulate private investment. Progress in liberalizing the electricity market should accelerate the transition to renewable energy, while much remains to be done to address the increasing scarcity of water resources and reduce gender gaps.
Approved By
Taline Koranchelian and Natalia Tamirisa (SPR)
The discussions took place during October 24–November 4, 2022. The team consisted of Roberto Cardarelli (head), Hippolyte Balima, Olivier Bizimana and Nordine Abidi (all MCD), David Bartolini (FAD) and Hector Perez-Saiz (SPR). Ananta Dua, Abigail Korman and Tatiana Pecherkina (all MCD) assisted in the preparation of the report. The mission met with the Head of Government Mr. Akhannouch, the President of the Chamber of Representatives Mr. Talbi Alami, the Minister of Economy and Finance Mrs. Fettah Alaoui, the Governor of the Central Bank Mr. Jouahri, and other senior officials and representatives of civil society. Mr. El Qorchi (OED) participated in most meetings.
Contents
Glossary
RECENT DEVELOPMENTS
OUTLOOK AND RISKS
POLICY DISCUSSION
A. Monetary Policy
B. Fiscal Policy
C. Financial Stability
D. Structural Reforms
STAFF APPRAISAL
BOXES
1. Distributional Impact of Inflation in Morocco
2. Assessing the Benefits of a New Fiscal Rule for Morocco
3. Gender Inequality and Growth in Morocco
FIGURES
1. Real Sector Developments
2. External Developments
3. Fiscal Developments
4. Monetary and Financial Developments
TABLES
1. Selected Economic Indicators, 2017–27
2a. Budgetary Central Government Finance, 2017–27
2b. Budgetary Central Government Finance, 2017–27
3. Balance of Payments, 2017–27
4. Monetary Survey, 2017–22
5. Financial Soundness Indicators, 2017–22
ANNEXES
I. External Sector Assessment Report
II. Risk Assessment Matrix
III. Public Debt Sustainability Analysis
Glossary
| AM L/CFT | Anti-Money Laundering and Combating the Financing of Terrorism |
| BAM | Bank al-Maghrib |
| CA | Current Account |
| CNSS | Social Security National Fund |
| ER | Exchange Rate |
| FATF | Financial Action Task Force on Money Laundering |
| FDI | Foreign Direct Investment |
| FX | Foreign Currency |
| GDP | Gross Domestic Product |
| IT | Inflation-Targeting |
| NMD | New Model of Development |
| NPLs | Nonperforming Loans |
| PP | Percentage Point |
| PPP | Public-Private Partnership |
| Q | Quarter |
| SOE | State-Owned Enterprise |
| VAT | Value-Added Tax |
| USD | United States Dollar |
| WEO | World Economic Outlook |
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.
