2012-11-14 20:48:55 - Morocco Business Forecast Report Q3 2012 - a new country guide report on companiesandmarkets.com

Despite not possessing hydrocarbon wealth, the Moroccan economy will remain a relative outperformer in North Africa over the medium term. Though 2012 will prove a challenging year as exposure to the European recession takes its toll, investor interest in the country as an export-oriented manufacturing hub for the European market, coupled with a burgeoning tourism industry, will bode well for Morocco´s underlying growth momentum through 2015. Despite the increasingly precarious state of public finances, fiscal policy will remain expansionary in the near term. The recently announced budget for 2012 has reaffirmed our view that the government would respond to popular protests about the state of the economy by ramping up spending on social services, subsidies and the public sector workforce.

 

 

Major Forecast Changes

We have turned less optimistic on Morocco´s growth outlook in 2012. Declining grain yields will hit private consumption, while anaemic growth in the eurozone will leave limited room for an export-led expansion. We have revised down our real GDP growth forecast from 4.0% to 3.4%, though we continue to expect the economy to rebound in 2013, forecasting growth of 4.7%.

Risks To Outlook

Our forecasts for both economic activity and fiscal policy assume that Morocco will benefit from significant inflows of foreign aid from the Gulf Cooperation Council and other organisations in 2012. Should this assistance fail to materialise, it would pose serious downside risks to the country´s outlook. Morocco´s balance of payments position is steadily deteriorating. Persistently high international commodity prices and weak growth in the eurozone are taking their toll on the current account, while financial account inflows have consistently failed to cover the shortfall. While we are not expecting to see a dirham devaluation in the near term – owing primarily to political considerations – the risks to this view are growing, and the possibility of a devaluation over the next 12 months is no longer negligible.

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