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Automotive and electronics exports increasing - Morocco抯 economy expanding

Wednesday, February 04, 2015 > 08:48:59
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(Global Arab Network)

Morocco’s economy is estimated to have expanded by around 3% in 2014 on the back of automotive and electronics exports increasing by more than a quarter in the first 11 months of the year and the government reining in public spending.

However, poor weather conditions weakened agricultural output, increasing the importance of food imports.

Morocco’s economic growth slowed to an annualised rate of 2.7% in the fourth quarter, according to official data released in early January. The IMF and the World Bank forecast GDP growth of 3% in 2014. However it is hoped the rate will rise in 2015 as agricultural output picks up. In addition, lower energy spending and an improving trade balance are set to help lift GDP growth to 4.4% in 2015 according to the government.

The country entered the new year with stronger fiscal fundamentals. The budget deficit shrank to 5.4% of GDP in 2014 from a peak of 7.3% in 2012, a result of higher social spending and the continuing impact of high oil prices and subpar export demand. In 2013, the government adopted an expenditure-reduction policy, cutting its subsidy bill to 4.7% of GDP and reducing its spending on wages and pensions.

Rosy outlook

The rosier outlook is in part a result of exogenous factors. Importing more than 90% of its energy needs, Morocco has benefitted from the recent decline in global oil prices, which is set to continue. Energy spending dropped 8.3% year-on-year (y-o-y) to Dh85.4bn (€7.57bn) between January and November 2014.

Despite a bad harvest and higher-than-average cereal imports, overall import spending fell by 0.3% y-o-y. Combined with a 6.7% uptick in exports in the same period, Morocco’s trade deficit shrank by 6.8% y-o-y to Dh170bn (€15bn).

In December, the central bank, Bank Al Maghrib, made an unprecedented move in cutting its benchmark interest rate twice in two consecutive meetings, which it hopes will encourage lending. The benchmark rate was reduced by 25 basis points in September and December, bringing it to 2.5% at the close of 2014.

African Ambitions

A boost in lending will help spur growth in the financial sector in Morocco, which had already seen a raft of reforms launched in 2014. Parliament gave final approval to a long-awaited Islamic finance bill in November, for example, which will permit the creation of Islamic banks and allow private firms to issue sukuk – a move which has caught the attention of several Gulf-based banks.

While the domestic market is expanding its offerings, a number of initiatives are looking to build upon the country’s links with fast-growing markets elsewhere in Africa. The development of Casablanca Finance City (CFC) – a combination of special zone and financial district – is helping to attract new funds and expand the sector’s regional clout. The zone, which among other targets aims to help channel capital into West African markets, was officially opened in 2013 and 60 companies have been granted CFC status, including a number of foreign financial institutions and professional services firms. The number is expected to rise to 100 by the end of 2015.

In many ways, CFC is building upon what has been a growing trend in Morocco’s financial services industry, with an increasing number of institutions acquiring or opening up subsidiaries in West Africa. Morocco’s three largest banks, Attijariwafa Bank, Banque Centrale Populaire (BCP) and BMCE Bank, have all rolled out new operations from Senegal to Gabon in recent years, aided in part by a push from the government to strengthen bilateral links. The head of state, King Mohammed VI, and a major business delegation went on a three-week tour through Mali, Côte d’Ivoire, Guinea and Gabon in March, signing several joint venture agreements on economic co-operation.

Natural Wealth

Banks and insurance companies are far from the only ones consolidating ties with sub-Saharan markets. Moroccan phosphates giant, Office Chérifien des Phosphates (OCP), is also planning its expansion in the region with a $600m fertiliser plant in Jorf Lasfar dedicated entirely to sales on the African market.

Phosphate prices are expected to remain volatile through 2015 due to a global production surplus, but the OCP is pushing ahead with investments worth Dh145bn (€12.86bn) until 2025 that should position the country well for a recovery in prices.

Phosphates have traditionally accounted for 10% of Morocco’s GDP and with prices recovering slightly in 2014, Office Chérifien des Phosphates (OCP) revealed strong third-quarter sales which boosted total revenue in the first nine months of 2014 by about 3% y-o-y to $3.7bn. The increase was largely driven by sales of processed fertilisers, which surged 63% y-o-y to 1.5m tonnes in the third quarter.

International oil firms accelerated exploration in Morocco’s untapped, but also unproven, offshore acreage in 2014. At least 10 offshore wells are slated to be drilled between 2014 and 2016, twice the number drilled in the last decade although some companies saw greater success in onshore blocks, such as Circle Oil which announced a “significant” gas discovery in its onshore Sebou block in mid-December.


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