NS4301

Summer 2015
Morocco

Background I
Morocco is the fifth largest economy in Africa
Middle income country with relatively open and diversified
economy
Export sector accounts for 30-40% of GDP
Relies considerably on tourism and workers remittances
Morocco economy based on market system, but growth in 1970s
led mainly by the state.
Agriculture accounts about 14% of GDP but 45% of population

Serious economic crisis in early 1980s due to:

Rising import costs,
Falling phosphate prices (after having quadrupled during the
1970s)
Significant food deficit and
Cost of Western Sahara conflict

Background II
In return for debt assistance from the Paris Club, the IMF and the
World Bank, Morocco agreed to major structural adjustment
program
Devalued currency
Liberalized trade and investment
Used higher interest rates to control inflation
Privatized state-owned enterprises and
Curbed government subsidies.

Country successful in its liberalization efforts

Some pain, but did not suffer from fiscal deficits that often result
from elimination of trade restrictions
By 2005 real GDP was almost double the level of 1975
Growth GDP 3.4% in 90s and 5% in the 2000s
3

Background III
Generally agreed that the policy reforms pursued by
Morocco in the late 1980s and early 1990s were instrumental
in the countrys subsequent growth performance and the
diversification of its production and exports.
Reforms have continued with two major developments in
the last twenty five years:
Trade liberalization and
Financial Reforms

Trade Liberalization
Country has ratified several free trade agreements
Euro-Mediterranean Free Trade Agreement with the EU, and a free
trade agreement with the U.S.

Background IV
Financial Reforms
Real interest rates negative during decades of financial repression in
1970s and 1980s
Financial reforms largely liberalized interest rates
Intent of reforms was to improve capacity of financial institutions to
mobilize domestic savings
Allocating financial resources based on market demand,
Curbing direct government intervention and
Increasing competition in banking sector

Soon after early reforms took effect interest rates positive and
high
Financial program accompanied by repeal of requirement that
limited foreign ownership of business to 49%
5

Background V

While the countrys growth has not been spectacular, it

has been fairly stable and sustained.
Still much needs to be done
Contrary to the assurances made at the time of the Arab Spring
demonstrations (2011)
Governance reforms have stalled
There has been a deterioration in economic freedom

Background VI

WEF Morocco I

Morocco: Economic Freedom I

Morocco: Economic Freedom II

10

Morocco: Economic Freedom

III

11

Morocco: Economic Freedom

IV

12

Morocco: Economic Freedom V

13

Morocco: Economic Freedom

VI

14

WEF Morocco II

15

WEF Morocco III

16

Current Situation I
Robert Looney, Morocco is Running out of Time, Foreign
Policy July 9, 2015
Main theme unemployment and economic stagnation
setting in. Many good ideas for reforms, but difficulty in
implementing them.
Considerable ISIS recruitment for fighting in Syria
Many of these fighters are returning to Morocco and
launching attacks.
Can country serve as a model alternative to ISIS and
other extreme groups and philosophy?

17

Current Situation II
Country sharp contrast
On one hand rising poverty, growing youth unemployment
and suppression of peaceful political dissent fertile ground
for Isis
On other hand a innovative, growth oriented approach to
development that combines best of Western and Islamic
principles
Also country has a spiritual but anti-theocratic style of
Islam that discourages extremism
Could be a model for many Arab countries, depends on
whether King Mohammed VI has the political will to
accelerate pace of reform.
18

Current Situation III

During Arab Spring in 2011 King initiated a series of
constitutional reforms after pro-democracy demonstrations
broke out
Stopped short of relinquishing his own power in favor of a
constitutional monarchy
Did increase the role and independence of the prime minister
and parliament.
In addition, new constitution provided for greater civil liberties
and expanded human rights
Similar promises had been made in past only to be rescinded
Still new constitution succeeded in defusing the crisis
In contrast to most Arab countries, Morocco appeared to have
emerged stronger politically from the Arab Spring.
19

Current Situation IV
However if unrest is to be controlled Moroccos deep
economic malaise needs to be addressed
Economy hard hit by international economic crisis of
2008-09
Falling remittances
High unemployment due to workers returning home from
overseas

Despite a growth rate of 4.6% between 2000 and 2010,

little improvement in levels of
Poverty
Inequality
Illiteracy and
Unemployment among recent graduates

Instead corruption and cronyism grew increasingly

conspicuous.

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Current Situation V
Both the king and the coalition government formed by the
Islamic Justice and Development Party (PJD) after 2011
elections attempted to institute reforms.
These involved
Expansion of a decentralized strategy to promote bottomup democracy by allowing communities to take charge of
their affairs
JPD promised to create jobs and raise educational levels
while curbing corruption and improving
Government effectiveness
Rule of Law and
Business climate.
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Current Situation VI
However while Morocco moved up two rankings on the Human
Development index by 2013 progress did not extend to other
areas
Economic growth declined to an average of 3.7% between 2011
and 2014
Unemployment rate which had fallen to 9.1% in 2010 has since
been stagnant with only 21,000 new jobs created in 2014
Slowdown occurred despite $3.4 billion in FDI
Composition of Moroccos unemployment troubling
At 20.6% youth unemployment is high rising to 39.9% among urban
workers aged 15-24
Rate of unemployment rises along with job qualifications
From 4.5% unskilled to 21.7% vocational skills to 24.6 for university
graduates

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Current Situation VII

Growing frustration with the government as illustrated
with the decline in social capital (a measure of trust)
Morocco fell from 13th in the world in 2010 to 84th by 2014
Poor performance of Moroccan economy has less to do
with viability of Moroccan model than with its
implementation
Government has focused its energies on laws and
institutional procedures instead of substantive reforms
Countrys performance deteriorated on five of the six
World Bank Governance Indicators between 2010 and 2013
Human rights provisions of the 2011 constitution have
been largely ignored.
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Voice: Accountability
45
40
35
30
25
20
15
10
5
1996

2000

2003

2005

2007

2009

Source: World Bank, Worldwide Governance Indicators, 2014

2011

2013
Country/Group
ALGERIA
EGYPT, ARAB REP.
MOROCCO
TUNISIA
Average

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Political Stability

60
50
40
30
20
10
0
1996

2000

2003

2005

2007

2009

Source: World Bank, Worldwide Governance Indicators, 2014

2011

2013
Country/Group
ALGERIA
EGYPT, ARAB REP.
M OROCCO
TUNISIA
Av erage

25

Government Effectiveness
80
70
60
50
40
30
20
10
1996

2000

2003

2005

2007

2009

2011

2013
Country/Group
ALGERIA
EGYPT, ARAB REP.
MOROCCO
TUNISIA
Average

26

Regulatory Quality
60
55
50
45
40
35
30
25
20
15
10
5
1996

2000

2003

2005

2007

2009

Source: World Bank, Worldwide Governance Indicators, 2014

2011

2013
Country/Group
ALGERIA
EGYPT, ARAB REP.
MOROCCO
TUNISIA
Average

27

Rule of Law
65
60
55
50
45
40
35
30
25
20
15
10
1996

2000

2003

2005

2007

2009

Source: World Bank, Worldwide Governance Indicators, 2014

2011

2013
Country/Group
ALGERIA
EGYPT, ARAB REP.
MOROCCO
TUNISIA
Average

28

Control of Corruption
80
70
60
50
40
30
20
10
1996

2000

2003

2005

2007

2009

Source: World Bank, Worldwide Governance Indicators, 2014

2011

2013
Country/Group
ALGERIA
EGYPT, ARAB REP.
MOROCCO
TUNISIA
Average

29

Total Governance
60
55
50
45
40
35
30
25
20
15
10
1996

2000

2003

2005

2007

2009

Source: World Bank, Worldwide Governance Indicators, 2014

2011

2013
Country/Group
Algeria
Egypt
Morocco
Tunisia
Average

30

Assessment I
Economy has been hindered by the slow and tentative pace of
change
PJD seems to have subscribed to The Chinese idea of
evolutionary institutionalism
Rather than risk dramatic changes in a new and highly uncertain
environment, prefer to move incrementally
Always looking for better ways to improve the economy, but with
minor reforms that can be easily reversed if proven ineffective
Some argue slow pace of change reflects concern over the
dislocation of the neo-liberal reforms in the 1980s
More likely explanation despite appearance of comprehensive
economic management, no real coordination between ministries
and agencies responsible for implementing and managing reforms

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Assessment II
Because Morocco still very much a monarchy, JPD has
no control over several key ministries whose directors
report to the king
Many ministries working at cross purposes each focusing
on its own priorities
Need to have more centralized decision making so all
participants are focused on same goals and coordinating
the sequence of reforms necessary for reaching these
objectives

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