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The Covid-19 pandemic has abruptly interrupted more than two decades of sustained socio-economic progress in Morocco, according to a recent World Bank report. The latter believes that although the Moroccan economy «exhibits some signs of recovery, the situation remains fragile given that epidemiological trends are worse now than they were during the first wave of contagions».
Real GDP for the year 2020 has contracted by 6.3, according to the World Bank. Morocco's latest economic situation monitoring report «From Relief to Recovery» indicates that the impact of the health crisis has significantly affected the budget deficit: 7.8 percent GDP in 2020.
On the other hand, public debt is expected to reach 76 percent of GDP. «The current account deficit is also expected to increase to 6 percent of GDP this year», the World Bank added.
Morocco, better placed than other emerging economies
Despite the severity of the crisis, the World Bank indicates that Morocco is «better placed than other emerging economies to weather this storm thanks to the credibility of its macro-fiscal framework, to its relatively large external buffers and to its good access to international financial markets».
Also, the Moroccan authorities have mobilized around 11 percent of GDP in «the form of loan guarantees, direct equity injections in Moroccan corporates, and to give a new impulse to infrastructure-related Public-Private-Partnerships».
The World Bank also recalls the establishment of «a new strategic investment fund» and the central «Guarantee Agency that has been transformed into a limited company». It also referred to the generalization of health insurance, family allowances, and measures to support the SME sector in the recovery.
However, the entrepreneurial sector will take a long time to recover from the consequences of the health crisis. Indeed, the World Bank describes a «significant and persistent impact» in Morocco, which is felt in particular in the formal private sector.
According to the international institution, «6.1 percent of surveyed formal sector firms are reported to have ceased their operations, and as many as 86.9 percent report a fall in sales of, on average, 50.4 percent of their pre-pandemic level».
These companies have also adopted coping strategies, including «growing use of the government’s lines of support, a reduction in the number of worked hours (but, comparatively, less lay-offs than in other countries), the use of internal funds to meet cash flow shortages, and increasing business activity online».
However, the World Bank believes that the current crisis is an opportunity for Morocco to remove the constraints that in the past have limited the development of a more dynamic private sector.
«Morocco could stimulate competition and level the playing field for new entrants in goods and services markets, while upgrading its human capital and institutional frameworks», the financial institution concluded.
