Economy of Morocco

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Economy of Morocco
Currency	Moroccan Dirham (MAD)
Fiscal year	calendar year
Trade organisations	WTO (Member as of January 1995)
Statistics [1]
GDP ranking	54st (June 29 2006) [2]
GDP	$135.74 billion (2005)
GDP growth	4.40% annual (estimate 2004)
GDP per capita	$4,503 (2005) [3]
GDP by sector	agriculture (21.7%), industry (35.7%), services (42.6%%) (2004) [4]
Inflation	1% (estimate 2005)
Pop below poverty line	33% (estimate 2005)
Labour force	(2004)
Labour force by occupation	agriculture (40%), industry (15%), services (45%)(estimate 2003)
Unemployment	11% (estimate 2005)
Main industries	Phosphates, rock mining and processing, food processing, fishing, leather goods, textiles, construction, tourism
Trading Partners [5]
Exports	$9.472bn (2005)
Export - Commodities	clothing, fish, inorganic chemicals, transistors, crude minerals, fertilizers (including phosphates), petroleum products, fruits, vegetables
Main export partners	France 37.5%, Spain 16.4%, United Kingdom 5.1% (2005) (2005)
Imports	$18.15bn (2005)
Import - Commodities	crude petroleum, textile fabric, telecommunications equipment, wheat, gas and electricity, transistors, plastics
Main import partners	France 30%, Spain 11.6%, Italy 5.4%, the People's Republic of China 5.3%, Germany 5.1%, Saudi Arabia 4.7% (2005)
Public finances [6]
Public debt	72% of GDP (2005)
Revenues	$12.94 billion (2005)
Expenses	$16.77 billion (2005)
Economic aid	$218 million (2002).

Morocco's economy is considered a liberal economy governed by the law of supply and demand although certain economic sectors still remain in the hands of the government.

The economic system of the country presents several facets. It is characterized by a large opening towards the outside. France remains the first trade partner (supplier and customer) of Morocco. France is also the first creditor and foreign investor in Morocco.

We can quote the various agreements of free trade that Morocco ratified with its principal economic partners like The Euro-Mediterranean free trade area agreement with the European Union with the objective of integrating the European Free Trade Association at the horizons of 2012; the Agadir Agreement, signed with Egypt, Jordan, and Tunisia, within the framework of the installation of the Arab Zone of Free Exchange; the US-Morocco Free Trade Agreement with USA which came into force in January 1, 2006 and lately the agreement of free exchange with Turkey. (See section below)

1 Macro-economic trend
2 Agriculture
3 Industry
4 Trade agreements
5 Foreign investments
6 Moroccan companies and industrial sectors
7 Handicaps
8 See also
9 Notes
10 External links

[edit] Macro-economic trend

Morocco is a fairly stable economy with continuous growth over the past half-a-century. Current GDP per capita grew 47% in the Sixties reaching a peak growth of 274% in the Seventies. However this proved unsustainable and growth scaled back sharply to just 8.2% in the Eighties and 8.9% in the Nineties.

This is a chart of trend of gross domestic product of Morocco at market prices estimated by the International Monetary Fund with figures in millions of Moroccan Dirhams.

Year	Gross Domestic Product	US Dollar Exchange	Inflation Index (2000=100)
1980	74,090	3.93 Dirhams	33
1985	129,507	10.06 Dirhams	53
1990	212,819	8.24 Dirhams	67
1995	281,702	8.54 Dirhams	91
2000	354,208	10.62 Dirhams	100
2005	460,855	8.86 Dirhams	107

For purchasing power parity comparisons, the US Dollar is exchanged at 3.33 Dirhams only.

Since the early 1980s the Moroccan government has pursued an economic program toward these objectives with the support of the International Monetary Fund, the World Bank, and the Paris Club of creditors. The country's currency, the dirham, is now fully convertible for current account transactions; reforms of the financial sector have been implemented; and state enterprises are being privatized.

Drought conditions depressed activity in the key agricultural sector, and contributed to an economic slowdown in 1999. Favourable rainfalls have led Morocco to predict a growth of 6% for 2000. Formidable long-term challenges include: servicing the external debt; preparing the economy for freer trade with the EU; and improving education and attracting foreign investment to improve living standards and job prospects for Morocco's youthful population.

Macroeconomic stability coupled with relatively slow economic growth characterize the Moroccan economy over the past several years. The present government has introduced a number of important economic reforms over the past several years. The economy, however, remains overly dependent on the agriculture sector. Morocco's primary economic challenge is to accelerate growth in order to reduce high levels of unemployment.

Through a foreign exchange rate anchor and well-managed monetary policy, Morocco has held inflation rates to industrial country levels over the past decade. Inflation in 2000 and 2001 were below 2%. Despite criticism among exporters that the dirham has become badly overvalued, the current account deficit remains modest. Foreign exchange reserves are strong, with more than $7 billion in reserves at the end of 2001. The combination of strong foreign exchange reserves and active external debt management gives Morocco the capacity to service its debt. Current external debt stands at about $19 billion.

Economic growth, however, has been erratic and relatively slow, partially as a result of an over-reliance on the agriculture sector. Agriculture production is extremely susceptible to rainfall levels and ranges from 13% to 20% of GDP. Given that almost 50% of Morocco's population depends directly on agriculture production, droughts have a severe knock-on effect to the economy. Two successive years of drought led to a 0.7% decline in real GDP in 1999 and stagnation in 2000. Better rains during the 2000 to 2001 growing season led to an estimated 6% growth rate in 2001. Over the long term, Morocco will have to diversify its economy away from agriculture to develop a more stable economic basis for growth.

The strongest point of Moroccan industry is phosphate mining near Khouribga and in Western Sahara. Morocco controls approximately two thirds of the world's phosphate reserves, placing it in a higher league than its major competitors, the People's Republic of China, Russia, and the United States. Although it employs only 2% of the population, phosphate mining is responsible for half of the nation's income.

The current government has introduced a series of structural reforms in recent years. The most promising reforms have been in the liberalization of the telecommunications sector. This process started with the sale of a second GSM license in 1999. In 2001, the process continued with the privatization of 35% of the state operator Maroc Telecom. Morocco has announced plans to sell two fixed licenses in 2002. Morocco also has liberalized rules for oil and gas exploration and has granted concessions for many public services in major cities. The tender process in Morocco is becoming increasingly transparent. Many believe, however, that the process of economic reform must be accelerated in order to reduce urban unemployment below the current rates above 20%.

Morocco has signed Free Trade Agreements with the United States of America and the European Union. The agreement with the United States has been ratified on July 22, 2004 in the United States Senate, by a vote of 85 to 13, while the agreement with the EU is to take effect by 2010.

[edit] Agriculture

Morocco consistently ranks among the world's largest producers and exporters of cannabis, and its cultivation and sale provide the economic base for much of northern Morocco. The cannabis is typically processed into hashish. This activity represents 0.57% of Morocco's Gross Domestic Product (GDP), being Morocco’s primary source of hard currency. A UN survey in 2003 estimated cannabis cultivation at about 1340 km² in Morocco's five northern provinces. This represented 10% of the total area and 27% of the arable lands of the surveyed territory and 1.5% of Morocco's total arable land^[1]. Morocco is a party to the 1988 UN Drug Convention and in 1992 Morocco passed legislation designed to implement it and its new national strategy against drugs formulated by its National Committee on Narcotics was adopted in 2005. That same year, the International Narcotics Control Board commended the Government of Morocco for its efforts to eradicate cannabis plant cultivation on its territory, which has resulted in the total potential production of cannabis resin in the Rif region decreasing by 10 per cent over the previous year. At the same time the board called upon the international community to support its efforts where possible^[2].

The country is the largest fish market in Africa, with an estimated total catch of 1,084,638 MT in 2001. A new four-year fishery agreement with the European Union will allow European vessels, mostly from Spain, to operate in Moroccan and Western Saharan waters in exchange for an economic compensation programme, which the National Fishery Office of Morocco intends to use to boost modernisation of its domestic fishery sector. ^[3] There have been constant disputes with Spain over fishing rights since 1973 when Morocco declared a Exclusive Economic Zone (EEZ), resulting on a 70 mile (130 km) coastal fishing limit. This was extended to 200 miles (370 km) in 1981^[4]. This "fish war" with Spain and the EU made daily headlines in Morocco.

It is also the largest almond producer in Africa, amounting to 1.7% of the world production, about 6,000 tonnes in kernels, marketed only for the domestic market.^[5]

[edit] Industry

Morocco is the largest silver market in Africa and second largest exporter of phosphate in the world

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[edit] Trade agreements

Morocco signed in 1996 an agreement of association with the European Union which came into effect in 2000. This agreement, which lies within the scope of the Barcelona Process (euro-Mediterranean partnership) started in 1995 and envisages the progressive implementation of a free trade area planned for 2012.

[edit] Foreign investments

Foreign nationals can invest freely in all the sectors, without any preliminary authorization.

In 2005 FDI in Morocco increased from $1.07 billion to $2.9 billion from 2004 to 2005. ^[6]

[edit] Moroccan companies and industrial sectors

Morocco counts around 60,000 companies of which 20,000 employs more than 10 employees. By 1999, 6,500 industrial companies of which 92% were Small and medium enterprises (less than 200 employees). The industrial sector constitutes one of the pillars of the Moroccan economy and offers real direct investment appropriatenesses, whether it is for operations of joint venture or subcontracting. Many possibilities exist in the fields of mechanics, metallurgy, electricity, electronics, plastics, information technologies and communication. Other more traditional sectors like leather, textiles, chemistry and building materials also interest foreign investors.

[edit] Handicaps

The Moroccan economy has been facing the problems typical of developing countries—restraining government spending, reducing constraints on private activity and foreign trade, and achieving sustainable economic growth. Current GDP per capita of Morocco grew 47% in the Sixties reaching a peak growth of 274% in the Seventies. But this proved unsustainable and growth consequently scaled back to 8.20% in the Eighties and 8.90% in the Nineties. Morocco is one of the rare Arab countries not to have significant oil and gas resources.