important your attention is drawn to the statement on the back cover of this report which affects your rights.
+Analyst: Rolf Danielsen. Tel : +46 8 763 83 92. E‐mail :
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eáÖÜÉê=Äìí=ìåëíÉ~Çó=ÖêçïíÜK Since 2002 average grovll las reacled aImosl 5° on
an annuaI basis. Tlal is a marIed improvemenl since lle 1990's vlen sIuggisl
performance bareIy Iepl pace vill a rapid popuIalion grovll. Bul as in lle pasl,
performance of lle economy varies mucl because of lle dependence of agricuIlure
lo erralic rainfaII. In 2007, for inslance, grovll dropped lo Iess llan 3° from aImosl
8° as farming vas lil by drougll llal reduced cereaIs oulpul by 80°. In normaI
years, agricuIlure accounls for 17° of GDI, bul empIoys 40° of lle popuIalion.
Oller seclors of lle economy, by conlrasl, conlinued expansion al a robusl rale of
aImosl 7°, leIped by rising oulpul from manufacluring, conslruclion and services,
incIuding offslore services
and lourism. In 2008,
observers expecl a parliaI
rebound in agricuIlure lo
supporl lle overaII grovll
rale relurning lo ils 6° lrend
pall. Higl inveslmenl rale al
cIose lo 30° of GDI slouId
leIp suslain robusl grovll in
lle medium lerm provided a
slabIe exlernaI environmenl
and recenl buoyanl credil
grovll does nol come lo a
sudden end.

eáÖÜÉê=áåÑä~íáçå: Some
observers lave raised
concerns aboul a rise in lle
infIalion rale llis year lo aboul 4° year on year (yoy), mainIy fueIIed by ligler
imporl prices despile subsidies llal leIp suppress lle pass-llrougl of inlernalionaI
price deveIopmenls. As gIobaI prices of food and energy lave begun lo faII bacI ve
llinI llis fear viII soon subside unIess lle 10° recenl vage liIe in lle spravIing
governmenl bureaucracy slouId prove lo lave second round effecls.
(annual % real growth)
Sectorwise growth rates
Agriculture Services Industries
Source: Reuters EcoWin
2000 2002 2004 2006
agricultural production remains

bñíÉêå~ä=Ä~ä~åÅÉë=ëÜçï=ëáÖåë=çÑ=Ñ~íáÖìÉ. Ior severaI years lle exlernaI baIance
sloved a leaIlly deveIopmenl vill lle currenl accounl posling persislenl if smaII
surpIuses even in years vill poor larvesl, and lle capilaI accounl producing a
groving surpIus mainIy due lo infIovs of foreign direcl inveslmenls (IDI) and oller
forms of non-debl crealing capilaI infIovs. As a resuIl lle cenlraI banI vas abIe lo
buiId reserves lo slrengllen lle confidence in lle exclange rale -- pegged lo a basIel
of euro and US$. Iasl year, by conlrasl, lle lrade deficil began lo viden slarpIy as
imporls oulpaced exporls incIuding of lourism. Tle imporl grovll vas expIained by
SEB Merchant Banking Country Risk Analysis Oct. 10, 2008

rising oiI and food prices bul aIso by ligler imporls of reguIar merclandise. Sucl is
oflen lle deIayed effecl of rapid credil grovll in parlicuIar vlen a groving slare of
nev credils goes lo lousing and morlgages. Tlere is nov a risI llal lle currenl
accounl surpIus viII lurn inlo a deficil of aImosl 4° of GDI llis year and remain al
llal IeveI in 2009 and beyond. Hovever, slrong reserves, exceeding lle IeveI of lle
exlernaI debl slanding al a reasonabIy Iov 30°/GDI of vlicl onIy a fraclion is on
slorl lerms, means llal lle lrade deficil slouId nol pose any immediale financing
probIem. Tlal is al Ieasl as Iong as marIels see lle governmenl persevere vill
prudenl poIicies largeling a budgel deficil villin 3° of GDI. In 2007 lle deficil feII
lo 0,7° of GDI leIped by slrong revenue grovll. Tlal leIped reduce ils debl/GDI
ralio lo 54°, vlicl is sliII Iarge, bul Iess onerous llan al lle beginning of lle decade.

bÅçåçãáÅ=éçäáÅáÉë: Tle
slabiIizalion of lle economy
las moved in paraIIeI vill
economic inlegralion llougl
lrade agreemenls vill lle US
and LU and slrucluraI reforms
llal began in earnesl afler lle
presenl Iing ascended lle
llrone in 1999 foIIoving lle
deall of lis faller. SeveraI
Iarge slale-ovned enlerprises
vere privalized and lle
governmenl Iaid pIans for
diversifying lle economy
avay from lle lradilionaI
seclors incIuding agricuIlure
and lexliIes. Specific zones
dedicaled lo offslore services
for Luropean firms vere opened, incIuding lle Casaslore in CasabIanca, and lle
governmenl devised a nev pIan ÷ IIan Azur for lle deveIopmenl of lle lourism
seclor, vlicl is sel lo increase from 7,5 miIIion lo 10 miIIion visilors in 2010. Oller
pIans aim al modernizing agricuIlure, lle so-caIIed Maroc Verl, or al improving
lransporl and infraslruclure. Morocco recenlIy opened a nev conlainer porl in
Tanger vlicl couId soon become one of lle Iargesl serving Lurope. Hovever, lle
governmenl las Iepl lle profilabIe plosplale induslry, vlicl leIps fiII governmenl
coffers. ÷ Nolvillslanding good progress vill many reforms, Morocco is sliII
perceived as a counlry of red lape, aclieving onIy number 129 from lle lop among
170 counlries in lle WorId BanIs survey: Lasy of doing business.
External balances
Current Account, Balance Trade Balance
Source: Reuters EcoWin
2003 2004 2005 2006 2007

Current Account
Trade balance

cáå~åÅá~ä=ëóëíÉã. Having remained dormanl for many years, lle banIing seclor las
recenlIy exlended ils aclivilies inlo nev areas of lle groving economy. Since 2006
domeslic credils exlension las acceIeraled lo 33° impIying an annuaIized average
grovll of 21°. WliIe nol exlraordinary compared vill many peers, sucl grovll
las neverlleIess raised concerns as regards lle abiIily of some of lle 16 domeslic
banIs lo landIe nev lypes of business incIuding for reaI eslale vlicl in 2007 sav
prices rise 45°. Nev Ioans lo enlerprises may aIso lave financed inveslmenls in a
booming slocI marIel vlicl vilnessed vaIues aImosl doubIe since 2005 and
capilaIizalion rise lo 95° of GDI. Tle grovll in oulslanding credils las so far
reduced lle NII/lolaI Ioans ralio lo 8° llanIs lo lle Iarger denominalor, bul lle
risI is llal lle IeveI may rise again slouId lle economy face more leadvinds. Mosl
of lle NIIs lave remained in lle pubIic financiaI inslilulions. Tley conlinue as lle
AcliIIes leeI of lle banIing syslem bul lle governmenl las made progress for lleir
reslrucluring. Tle privale banIs are dominaled by five Iarge enlilies, of vlicl llree
are foreign ovned. Tle IMI recenlIy commended lle syslem for ils resiIience lo
slocIs and ils insuIalion from ongoing lurmoiI in inlernalionaI credil marIels. To
slrengllen lle syslem furller lle cenlraI banI las raised minimum capilaI
requiremenls from 8° lo 10°, effeclive as of 2009.

SEB Merchant Banking Country Risk Analysis Oct. 10, 2008

mçäáíáÅ~ä=ëí~Äáäáíó: laving ascended lle llrone, lle nev Iing vas aIso quicI in
IiberaIizing poIilicaI Iife. In principIe lle monarcly vas clanged from absoIule lo
conslilulionaI aIllougl llal did nol prevenl lle King from remaining in lis roIe as
reIigious ccmmcn!cur and conlinuing lo loId a guiding land over generaI poIilicaI
deveIopmenls. IarIiamenlary eIeclions lave mosl of lle lime resuIled in coaIilion
governmenls vill lle presenl dominaled by lle sociaI democrals. Hovever, lle Iasl
eIeclions, in 2007, aIso resuIled in a major gain for lle Iargesl IsIamic parly. Tlal
raised concerns in some quarlers, bul lle IsIamic movemenls in Morocco are
rejecling vioIence and exlremism in Iine vill lle prevaiIing allilude of lle
popuIalion of vlicl 99° are Sunni MusIims. NeverlleIess, in a counlry vlere
unempIoymenl remains ligl al more llan 10° on average and vill pocIels of mucl
ligler unempIoymenl ralios, in parlicuIar among lle educaled youll, observers
remain on guard againsl signs of sociaI lensions incIuding vill reIigious underlones.
oÉÖáçå~ä=ëÉÅìêáíó: Since Iong, Morocco las a lroubIed reIalionslip lo neiglboring
AIgeria. Il slarled vill a border dispule severaI decades ago and conlinued as
AIgeria supporled lle emergence of lle IoIisario movemenl llal in 1975 Iauncled a
gueriIIa var againsl Morocco lo gain independence for Weslern Salara, a former
Spanisl coIony llal Morocco regarded as a province under ils sovereignly.
DipIomalic reIalions vere broIen and lle Iong common border cIosed. Recenl years'
miIilary buiId-up in boll counlries vill Iarge purclases of arms from lle US in
Morocco and from Russia in AIgeria las raised lle specler for lle dipIomalic rifl
becoming a miIilary confronlalion. Some observers lave feared llal sucl lension
couId serve as a prelexl lo fomenl exlremism.


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mc|cs it tcmptinv tc |ci| t|c ccuntru cs c ncu stcr pcr|crmcr. pcr|cps cn “Arccic Victncm¨.
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cut c| pctcrtu cs c mccns tc stcm t|c risinv in||cu c| i||cvc| immivrcnts. Onc c| t|c rctinv
cvcncics |cs c|rcc!u rcisc! t|c ccuntru tc intcstmcnt vrc!c. u|ic|. |cuctcr. ct|cr ccscrtcrs
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mc!crn Arccic ncticn cn t|c pct| tc rcvu|cr !cmccrccu. t|crc crc !cunsi!c pc|iticc| ris|s
t|ct ccu|! cc cn|cncc! s|cu|! t|c ccuntru ncu cc |it cu c |cnvcr !cunturn c| its mcin
cxpcrt mcr|cts.
Key ratios 2007
Population (mill.) 31,6
GDP/capita ($) 2406
GDP (change) 2,7%
Inflation 2,0%
Curr.Acc. Balance/GDP -0,1%
Reserves/imports (months) 13
Budget balance/GDP -0,2%
Government debt/GDP 9%
Graph: The pentagon shows Morocco's risk profile as
relatively strong on liquidity, but weaker on macro balance
and resilience compared with the representative emerging
market country. It scores about average on event risk and
Iilcl: BBB-
S&I: BB+
Absence of event
Macro balance
Morocco Average EM
How to read the chart?
Moving out from the center
reduces risk.

SEB Merchant Banking Country Risk Analysis Oct. 10, 2008

Key data: 2002 2003 2004 2005 2006 2007 2008 2009
GDP (mill.US$) 40 50 57 60 66 75 90 89
GDP/capita (US$) 1370 1671 1889 1952 2127 2406 2847 2774
GDP (change) 3,3% 6,4% 4,7% 3,0% 7,8% 2,7% 6,0% 4,2%
Investments/GDP 25% 26% 26% 28% 28% 28% 28% 28%
Budget balance/GDP -3,9% -3,2% -3,1% -3,8% -1,8% -0,2% -3,1% -3,0%
Govt debt/GDP(*) 12% 12% 12% 12% 10% 9% 8% 7%
CPI inflation (%) 2,8% 1,2% 1,5% 0,9% 3,4% 2,0% 3,3% 3,0%
Money demand (%) 6% 9% 8% 14% 17% 16% 11% 7%
Stock prices (%change) 3% 19% 11% 63% 58%
Interest rates 3,0% 3,2% 2,4% 2,8% 2,6% 3,3% 3,9% 4,2%
Exch. Rate ($) 11,02 9,57 8,87 8,87 8,80 8,19 7,49 8,15
Trade/GDP (%) 63% 53% 50% 51% 50% 51% 47% 54%
Oil price (Brent) $29 $38 $54 $65 $73 $117 $113 $101
Billions US $
Export of goods 12,3 12,2 13,0 13,4 14,9 16,5 17,6 20,3
Imports of goods 13,3 14,3 15,7 16,9 18,0 21,6 24,8 28,1
Other: 2,4 3,7 3,7 4,5 4,9 5,0 3,5 3
Current account 1,5 1,6 0,9 1,0 1,8 -0,1 -3,7 -4,2
(% of GDP) 3,6% 3,1% 1,6% 1,7% 2,7% -0,1% -4,1% -4,7%
FDI (net) 0,1 2,3 0,8 1,5 2,3 2,6 3,1 3
Loan repayments -2,6 -3,0 -2,4 -2,1 -2,8 -2,5 -3,0 -3,5
Net other capital flows 2,7 2,8 3,2 -0,5 2,9 3,8 3,8
Balance of payments 1,7 3,7 2,5 -0,1 4,2 3,8 0,2
Reserves 9,9 13,6 16,1 16,0 20,2 24,0 24,2 25,1
Total debt 18,4 18,7 17,4 16,7 18,5 18,9 21,8 25,2
o/w short term debt 1,7 1,3 0,2 0,7 1,8 1,8 2,1 2
Source: OEF (Oxford Economic Forecasting) and SEB estimates.
(*) Ecluding public enterprises
Rating history
Fitch (eoy) BBB-
S&P (eoy) BB BB+ BB+ BB+
Type of government:
Next elections 2012
Latest PC deal 1992 (active)
Recent IMF programs 1992 GRA
all shares
Stock market
Source: Reuters EcoWin
04 05 06 07 08
Policy Interest Rates
Source: Reuters EcoWin
00 02 04 06 08
Exchange rate
Source: Reuters EcoWi n
00 02 04 06 08
ar 12 months
Source: Reuters EcoWi n
02 03 04 05 06 07

SEB Merchant Banking Country Risk Analysis Oct. 10, 2008




Tle informalion in llis documenl las been compiIed by SLB Merclanl BanIing, a
division villin SIandinavisIa LnsIiIda BanIen AB (pubI) (“SLB¨).

Opinions conlained in llis reporl represenl lle banI's presenl opinion onIy and are
subjecl lo clange villoul nolice. AII informalion conlained in llis reporl las been
compiIed in good faill from sources beIieved lo be reIiabIe. Hovever, no
represenlalion or varranly, expressed or impIied, is made vill respecl lo lle
compIeleness or accuracy of ils conlenls and lle informalion is nol lo be reIied upon
as aullorilalive. Anyone considering laIing aclions based upon lle conlenl of llis
documenl is urged lo base lis or ler inveslmenl decisions upon sucl invesligalions
as le or sle deems necessary. Tlis documenl is being provided as informalion onIy,
and no specific aclions are being soIiciled as a resuIl of il: lo lle exlenl permilled by
Iav, no IiabiIily vlalsoever is accepled for any direcl or consequenliaI Ioss arising
from use of llis documenl or ils conlenls.

SLB is a pubIic company incorporaled in SlocIloIm, Sveden, vill Iimiled IiabiIily. Il
is a parlicipanl al major Nordic and oller Luropean ReguIaled MarIels and
MuIliIaleraI Trading IaciIilies (as veII as some non-Luropean equivaIenl marIels)
for lrading in financiaI inslrumenls, sucl as marIels operaled by NASDAO OMX,
NYSL Luronexl, Iondon SlocI Lxclange, Deulscle B∏rse, Sviss Lxclanges,
Turquoise and Cli-X. SLB is aullorized and reguIaled by IinansinspeIlionen in
Sveden: il is aullorized and subjecl lo Iimiled reguIalion by lle IinanciaI Services
Aullorily for lle conducl of designaled inveslmenl business in lle UK, and is
subjecl lo lle provisions of reIevanl reguIalors in aII oller jurisdiclions vlere SLB
conducls operalions.

SLB Merclanl BanIing. AII riglls reserved.