Please ensure Javascript is enabled for purposes of website accessibility

Morocco: Growth outlook clouding

Daniel Richards - MENA Economist
Published Date: 02 June 2022


As global pressures related to the Russian invasion of Ukraine combine with domestic pressures from persistent drought, we have made a sizeable downward revision to our 2022 growth forecast for Morocco. We are now predicting growth of just 1.3% this year, almost two percentage points slower than we had previously envisaged, and down sharply from the 7.5% growth seen in 2021 as the economy rebounded from the Covid-19 pandemic. In 2023 we expect a pick-up in growth to 3.7%, but this will remain susceptible to the vagaries of the weather: swings in rainfall have been the key determining factor in Morocco’s output in recent years, in an economy which is still around 12% agricultural.

Rainfall has become unpredictable in Morocco, with lower net levels since 2018 having led to the level of water in reservoirs falling to just 33.7% at present, according to Nizar Baraka, the minister for equipment and water. This has had severe implications for the agriculture sector already this year, as it declined -12.1% y/y in the first quarter after having rebounded in 2021. According to the FAO this has taken production to record lows, especially in the south, and the outlook is weak for the rest of the year, thereby likely remaining a drag on output through the subsequent quarters also.

Real GDP growth, % y/y

Source: Haver Analytics, Emirates NBD Research

On an expenditure basis, this will impact growth through net imports, with a higher import demand for wheat and barley amid this lower domestic production. This makes for especially poor timing given the sharp rise in global wheat prices since the Russian invasion of Ukraine in late February. The two countries are amongst the world’s biggest exporters of grains, and while Morocco is somewhat less exposed to the Black Sea region compared to some of its North African peers (around 20% of its wheat imports come from there as compared with Egypt’s 80% or so) it will nevertheless be hit by the sharp rise in prices more generally.

Wheat futures, USd/bu

Source: Bloomberg, Emirates NBD Research

The government has taken steps to lessen the inflationary impact of this on households through subsidising wheat imports, but price growth has nevertheless accelerated rapidly. After two decades of low and stable inflation, the headline CPI figure hit a record 5.9% y/y in April, driven by a 9.1% acceleration in food prices. High oil prices, in part another product of the East European conflict, have also been an issue as transport inflation rose to 12.4%. This will serve to crimp household incomes, especially as unemployment remains elevated at 12.1% in the first quarter. Around a third of jobs in Morocco stem from the agricultural sector according to the World Bank, while the tourism sector, which according to the World Travel & Tourism Council accounts for another 10% of employment, is also under pressure from residual Covid-19 issues, and disruption from the war.

CPI inflation, % y/y

Source: Haver Analytics, Emirates NBD Research

The Moroccan tourism sector is less exposed to Russian and Ukrainian visitors as compared with Egypt and Tunisia. Nevertheless, with the Omicron wave of Covid-19 having led to closed borders earlier in the year, the recovery in 2022 will be slower than had been anticipated. With accelerating inflation in the key Eurozone economies also, demand for foreign travel might prove to be less resilient even despite the household savings amassed through the pandemic crisis.