II Economic context

Macroeconomic trends

Both stmctural and sectoral reforms that give a greater role to market forces and that have as an ultimate objective to generate higher growth rates and increase job creation were adopted in Morocco. They led to some growth but could not create enough employment opportunities leading many job seekers into informal jobs. GDP in constant prices (national currency) annual growth rate in Morocco averaged 3.8 per cent from 2008 until 2018. The highest growth levels in the last decade were reached in 2008 with 5.92 per cent GDP growth and in 2011, with more than 5 per cent GDP growth. The lowest growth rates were registered in 2016 at 1.18 per cent. The growth was also below 3 per cent in 2014 and 2018. After 2008, the net debt started to increase again progressively and it remained around 65 per cent in 2016, 2017 and 2018. The budget deficit was equal to 3.7 per cent in 2018.

Growth is affected both by the drought and the economic situation of European countries. The drought impacts agricultural production which is still an important component of GDP despite a decline in its share of total production. The European economic situation affects Moroccan growth through its impact on Moroccan residents’ remittances, foreign direct investments, exports and tourism. The impact of the 2008 crisis on the Moroccan economy highlighted its vulnerability' to the economic situation in Europe and was analysed by a number of reports such as that of Institute Royal des Etudes Strategiques and the one by the Ministry' in charge of Moroccan residing abroad.

Despite a stable macroeconomic environment, Moroccan growth is still considered by various observers as below the required level. Observers generally agree that growth in Morocco is not inclusive enough and concomitant with relatively high consumption inequalities and large regional disparities. Growth is still volatile; despite a reduction of volatility, there is highly dependence on agriculture and job creation is insufficient to create enough employment for a growing population. The overall unemployment rate increased between 2016 and 2017 from 9 per cent to 10.60 per cent and it declined between 2017 and 2018 from 10.6 per cent to 9.90 per cent. The youth unemployment rate already at 22.80 per cent in 2016 rose to 28 per cent in 2017 and declined slightly to 27.40 per cent in 2018.

TABLE 5.1 Real GDP growth, unemployment and youth unemployment in Morocco 2008-18

The economic reforms undertaken in Morocco include trade and financial liberalisation, fiscal reforms and sectoral policies. The economic liberalisation was accompanied by structural transformations of the economy with new sectors emerging such as agri-business, automotive, aeronautics and pharmaceuticals industries (Freund and Theodore, 2017).

Morocco in the last decade opened up to trade via tariff' reforms and free trade agreements with various parts of the world and fostered economic liberalisation by reforming investment, competition policy and the exchange regime. Trade agreements concluded and implemented have a major impact on the economy. This openness resulted in an increase in the share of exports and imports as a percentage of GDP and in greater diversification in terms of markets and goods. In 2018, despite an increase in phosphate exports and automobile exports, the current account deficit as a percentage of GDP reached 5.9 per cent of GDP. This was due to an increase in imports (energy) and a decline in the remittances of Moroccans living abroad. In 2019, the current account deficit was expected to decrease.

Morocco also undertook to liberalise its financial sector. The reforms include consolidating the financial sector control and oversight framework, diversifying financial instruments, improving financial inclusion, positioning Casablanca Finance City' as a regional and international financial hub and easing exchange control. The new status of Bank A1 Maghrib (the Moroccan Central Bank) came into effect in July 2019. It aims to strengthen the independence of the Central Bank, increase its autonomy and expand its role. The exchange rate regime has also been relaxed. The Dirham can now fluctuate in both directions relative to its target rate and since January' 2018, the band of fluctuation of the Dirham has been widened from ±0.3 per cent to ±2.5 per cent. Exchange rates have remained in the band of fluctuations without intervention of the central bank since March 2018.

The fiscal reform aims to insure the sustainability of public finances and debt. It gives priority' to infrastructure, social development and social protection of vulnerable groups. In order to strengthen the efficiency and fairness of the tax system, the reforms seek a simplification of tax legislation, broadening the tax base, reducing marginal tax rates, improving compliance and reducing informality. A significant reform of the compensation was introduced since 2000. In 2015, the liquid petroleum products sector was liberalised. In 2019, only three products remain subsidised (butane gas, sugar and domestic wheat flour). In order to improve the coordination, effectiveness and targeting of social protection programmes, a social registry is being prepared. This unified national registry should facilitate the targeting of disadvantaged populations.

A number of structural reforms have helped improve the environment and the business climate. They focused on strengthening competition, modernising the legal and regulatory frameworks for businesses and fighting corruption. Morocco gained 55 rankings in the Doing Business indicators between 2011 (when it stood at 115 out of 183) and 2019 (the year where it is 60th out of 190). Improvements included starting a business, registering property', cross-border trade and resolving insolvency. A law passed in November 2018 also specifies that all the legal procedures for the creation of a business must be carried out electronically and an electronic platform for this purpose was created by the law in last January. The President and the Board of Directors of the Competition Council have been designated and the Council is now operational.

A number of sectoral policies in agriculture, industry, fisheries, tourism and digital transformation complemented the more global policies. The sectoral policies did not succeed in achieving their objectives in terms ofjob creation and the estimates regarding job creation of each sectoral policy given by their respective ministries are contradicted by the number of net job creation given by the statistical office.