Morocco exhibits stable growth but faces ongoing challenges

Morocco exhibits stable growth but faces ongoing challenges

The North African kingdom of Morocco faces both substantial challenges and growth opportunities in the coming years. Despite reports of being the #1 investment destination in Africa in 2017, the country will need to grapple with some deeply rooted challenges before reaching its full potential as a regional powerhouse and premiere African hub for international investment.

The development of global partnerships

Moroccan growth prospects are underpinned by its robust global partnerships. Morocco continues to cultivate strong relations with European nations, who rely on the kingdom for its critical role on issues of migration and counterterrorism. Morocco also has the distinct advantage of sitting upon the majority of the world’s phosphate rock, a natural resource that Europe is critically dependent on for its agricultural sector. In a September meeting in Rabat, EU Commissioner Junker remarked,“for the EU, Morocco is a major strategic partner in North Africa and the entire continent. We share many common challenges and opportunities.”

To that end, Morocco accepted $160 million from the EU in October to stem the flow of migrants entering Europe via the Spanish enclaves of Ceuta and Melilla on Morocco’s northern coast. This is a considerable increase from the estimated $20 million received last year. Another important dynamic factoring into Moroccan-EU relations is the status of the Sahrawis, a people of the Western Sahara, represented by the Polisario Front, thousands of whom have been tortured, imprisoned, and killed  while resisting the Moroccan occupation. Ultimately, however, European governments are unlikely to pressure Morocco based on human rights concerns. This reflected in the continued migrant funding for widespread crackdown of sub-Saharan migrants, despite arbitrary arrests, expulsions, and generally inhumane treatment.

While Morocco is highly dependent on European funding and investment, the kingdom has also made strategic moves to withstand shocks to the European market. King Mohammed VI has assuaged some of the concerns of reliance on the Europeans through adoption of the Africa Agenda on Migration. The agenda has revitalized Morocco’s presence on the continent, prescribing cohesion and “unity of action”, and making Morocco the second biggest African investor in Africa. In March of 2017, the king signed 80 bilateral agreements with the Mali, Guinea, Gabon, and the Ivory Coast, covering trade and investment issues. Mouhcine Jazouli, first Deputy Minister of African Affairs, has said that the primary goal of the agenda is to “propel Africa into a paradigm that sees migration as an opportunity for economic growth and a chance for the future of our continent.” Most recently, the King has made a concerted effort to reconcile with Algeria, who has long been at odds with the state, though it seems the outreach attempt was largely rebuffed. This outreach continues recent efforts to reverse decades of neglect stemming from diplomatic tensions with the African Union.

Morocco has looked beyond its traditional partners as well, making strides by expanding ties and negotiating high level deals with China. Chinese investors are increasingly flocking to Morocco, in part to take advantage of Morocco’s valuable free trade agreements with Europe and the United States. Morocco is “becoming a media darling in China” as the country’s stability, location and culture entice Chinese investment; tourism has also skyrocketed, following a loosening of visa restrictions. This is signified by a $10 billion joint project, which was proposed and accepted by the Chinese group Haite, to develop an industrial city for about 300,000 Moroccans. However, the city has yet to come to fruition, indicating that there may be some structural obstacles that prevent expeditious growth and economic modernization.

Persistent, fundamental challenges

Indeed, despite these varied political pursuits, Moroccan economic growth remains fragile and vulnerable. The World Bank’s report in April observed that, “In the absence of more decisive structural reforms,” Morocco’s GDP is set to decline. To prevent the fragile economic climate from worsening, the report advocates a need to prioritize “inclusive growth…lower corporate tax rates, improve public investment management, and better enforce tax payments by the self-employed and liberal professions.” In a similar vein, in August, World Bank’s vice-president for the MENA region Ferid Belhaj, said: “over the years, there have been serious efforts in terms of reforms and infrastructure. That is why I see Morocco full of potential. But there is another Morocco that is facing enormous difficulties, namely of resource redistribution and social cohesion. There is something a bit upsetting: there are so many possibilities and achievements that make Morocco a regional exception, but there are also some lapses.” Substantive, internal economic reforms will be a critical step in stabilizing the economy and enabling inclusive development.

The leadership in Morocco encompasses both the exceptional status of Morocco in the region, as well as the entrenched challenges. Despite spending on flashy infrastructure projects, like deals on bullet trains and founding new cities, many basic infrastructure and development needs around the country are not being met. While the government holds a tight rein on a steady leadership– or at least, greater than its neighbors in the post-Arab Spring era– the kingdom will need to work to address these critical cracks and looming threats if it is to continue on a trajectory of upward growth.

Beyond economic disparities, the country faces a significant challenge in the form of climate change. Brookings Institution predicts that climate change is going to result in average temperatures rising across the North African region by 3°C by 2050. In effect, though rates of precipitation are expected to decline by 10%, demand for water will continue to rise exponentially. This will have a tremendous impact on the agriculture sector, and further underscores the need for Moroccan diversification and inclusive modernization of their economy.

Stable outlook for Morocco

Overall, Morocco is experiencing slow but stable growth. Its recent BBB scoring indicates a stable outlook for Morocco, with indicators ranging from fiscal consolidation leading, to a trend reduction in government debt/GDP, to sustained improvement in the current account balance consistent with declining net external debt-to-GDP, to stronger growth potential and an improvement in development indicators. This suggests that over the medium to long-term, positive economic trends in the country outweigh some of the ongoing structural risks. Morocco is in fact taking steps towards sustainable growth. However, certain key social and economic issues, including treatment of vulnerable populations, will present an important test as to whether Morocco will emerge in the future as a strong, inclusive economy and move beyond its corrupt tendencies, or ossify into its old ways. In order to secure its place as a regional hub for growth and progress, internal reforms will be absolutely critical.

About Author

Carly West

Carly West graduated with an honors BA/MA in International Affairs from Brown University’s Watson Institute. Carly has subject matter expertise in MENA/Eurasian geopolitics, CVE, and the WPS agenda. She has worked at RANE (Risk Assistance Network Exchange), the UN Office for the Coordination of Humanitarian Affairs, UN Women, and the US State Department at the Office for Global Women’s Issues. Carly is a born and bred New Yorker, but has lived in China and Turkey, and has travelled extensively through South East Asia and West Africa.