Identifier
Created
Classification
Origin
06CASABLANCA236
2006-03-03 11:46:00
UNCLASSIFIED
Consulate Casablanca
Cable title:  

MOROCCO MACROECONOMIC UPDATE

Tags:  ECON EFIN EIND ELAB ETRD MO 
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VZCZCXYZ0001
RR RUEHWEB

DE RUEHCL #0236/01 0621146
ZNR UUUUU ZZH
R 031146Z MAR 06
FM AMCONSUL CASABLANCA
TO RUEHC/SECSTATE WASHDC 6323
INFO RUEHRB/AMEMBASSY RABAT 7473
UNCLAS CASABLANCA 000236 

SIPDIS

SIPDIS

STATE FOR NEA/PI AND NEA/MAG

E.O. 12958: N/A
TAGS: ECON EFIN EIND ELAB ETRD MO
SUBJECT: MOROCCO MACROECONOMIC UPDATE

UNCLAS CASABLANCA 000236

SIPDIS

SIPDIS

STATE FOR NEA/PI AND NEA/MAG

E.O. 12958: N/A
TAGS: ECON EFIN EIND ELAB ETRD MO
SUBJECT: MOROCCO MACROECONOMIC UPDATE


1. (U) SUMMARY: Official Government of Morocco (GOM)
figures confirm positive yet low economic growth in

2005. GOM officials cite high energy prices, an
adverse agricultural season and unfavorable
developments in the textiles sector as contributing to
restrained economic growth. Unexpectedly, GOM
officials anticipate posting a current account surplus
in 2005 (earlier figures forecast the first current
account deficit in four years). However, the surplus
will likely be small, reflecting Morocco's worsening
trade deficit. Non-trade elements of the services and
private transfer accounts of the Balance of Payments
(i.e. tourism and remittances),continue to save the
day, compensating for Morocco's visible trade balance.
Imports increased significantly in 2005 driven by high
oil prices while exports failed to keep pace, despite
strong performance in the phosphates sector. Foreign
Direct Investment (FDI) increased 70.8% over 2004 to
reach almost US $3 billion in 2005, driven by increased
investment in telecommunications and tourism.
Inflation remained steady at 1%, despite higher oil
prices triggering rising consumer prices in the
transport sector. Lastly, unemployment continues to
rise, notwithstanding the creation of a quarter million
new jobs in 2005. END SUMMARY.

Positive Growth Rate, But Still Sluggish


2. (U) GOM Minister of Finance and Privatization (MOF)
Fathallah Oualalou announced 1.8% economic growth for
2005 and forecast 5.4% growth for 2006. While
attributing subdued 2005 economic growth to adverse
agricultural conditions, Oualalou credited strong
performance in non-agricultural sectors (which
registered 4.4% growth) with ensuring overall positive
growth for the year. However, the final figure is
still well under the GOM's target of 3% growth for

2005. Sectors that performed particularly well include
mining, petroleum refining, and tourism.

Public Finance


3. (SBU) Improvement in overall tax receipts
contributed to increased government revenue, which
registered US $14 billion in 2005, an increase of 12%.

Expenses increased nearly US $2 billion (20% over
2004). Domestic debt increased significantly, reaching
US $29 billion or 56.1% of GDP, up from 50.5% in 2004.
Foreign debt fell to US 12.4 billion, or 25% of GDP
from US $14 billion, 26% of GDP, in 2004, consistent
with GOM strategy to transfer expensive foreign debt to
relatively cheaper domestic alternatives. Some local
observers, however, are alarmed at the increasingly
level of domestic debt arguing it cannot be
rationalized by foreign to domestic debt transfers.
Total debt stands at over US $40 billion, representing
over 75% of GDP. The government budget deficit
registered 4.2% of GDP in 2005(or 5.7% excluding
privatization receipts). Oualalou credited increases
in revenue to strong performance of direct tax
receipts, including corporate receipts (up 22% from
2004) and income tax receipts which increased 16%.
Total revenue from direct taxes increased 18.8% in
2005, a figure Oualalou describes as "remarkable".

Current Account Surplus (Just Barely)


4. (U) Morocco will register a current account
surplus in 2005, albeit a small one, continuing a trend
of four consecutive years of current account
surpluses(2004, $1.1 billion, 2003, $1.6 billion, 2002,
$638 million, 2001, $3.8 billion). Earlier GOM figures
suggested Morocco might register a current account
deficit for 2005 and final figures confirming the
surplus are still pending. Preliminary 2005 BOP
figures still confirm a worsening of Morocco's Balance
of Trade (BOT) with tourism and remittances continuing
to compensate for Morocco's negative balance of trade
in goods.

Tourism Performs Well


5. (U) Tourism receipts increased 18% in 2005,
totaling US $4.7 billion and representing a 40.9%
increase over the average tourism receipts received
between 2000 and 2004. In December 2005 alone, tourism
receipts registered 22% higher than December 2004.
Morocco received more than 5.8 million tourists in
2005, of which almost 2.8 million were Moroccan ex-
patriats. Among foreign nationals, France led in total
number of tourists (1.3 million visitors representing a
15% increase from 2004),while Germany had the highest
percentage increase from the previous year (29% in
2005, totaling 1.9 thousand visitors). GOM 2005
figures indicate a 16% increase in hotel stays and an
improved average hotel occupancy rate of 47% compared
to 43% in 2004.

Remittances Stronger Still


6. (U) Remittances from Moroccans living abroad
totaled to more than US $4.5 billion in 2005, an
increase of 8.2% compared to 2004 and an increase of
23.8% over the average received during the past five
years. (Between 2000 and 2004, remittances receipts
average US $3.8 billion, equivalent to almost 10% of
GDP.) Along with tourism receipts, remittances have
traditionally been critical to compensating for
Morocco's trade deficit and maintaining foreign
exchange reserves.

Foreign Direct Investment and Foreign Reserves


7. (U) Foreign Direct Investment (FDI) increased 70.8%
over 2004 to reach almost US $3 billion in 2005, led by
investments in telecommunications and tourism, the
latter driven by Gulf Arab investors such as the United
Arab Emirates (UAE). Comparatively, FDI receipts
averaged US $2 billion between 2000 and 2004. FDI
registered its highest performance since the record
setting figures of 2001. Foreign reserves increased
10.3% to stand at nearly US $17 billion, equivalent to
11.3 months of imports. In 2004, foreign reserves
stood at $15.2 billion equivalent to almost 12 months
of imports.
Exports and Imports


8. (U) Morocco's 2005 imports increased 13% over 2004
to reach over US $20 billion. GOM officials attribute
much of the increase to a 64.7% increase in fuel
imports. Import figures excluding fuel registered a
7.7% increase, and 2005 fuel imports are 32.8% higher
than the average over the past five years. Among other
increases, finished goods rose +4.9%, semi-finished
goods +6.3% and foodstuffs +13.3%. Significant
increases in importation of rental cars (+28.8%) and
industrial vehicles (+33.3%) were also recorded.


9. (U) Total exports increased 5.5% to reach US $10.5
billion led by increased export of phosphates and
derivative products (+16.1%),while exports excluding
phosphate figures increased 3.5%. With the notable
exceptions of consumer products (-4.7%) and capital
equipment (-12%),most product categories registered
increases, including foodstuffs (+16.3%),energy
(+19.8%),and raw materials (+20%). However exports
were still outpaced by increased imports, resulting in
a net negative balance of trade in goods. The cover
rate of exports to imports declined from 55.7% to 52%
in 2005.

Oil and Inflation


10. (U) Escalating oil prices continued to hamper
Morocco's macroeconomic performance throughout 2005,
with oil imports reaching US $2.7 billion, a 64.7%
increase from 2004. Morocco depends on energy imports
and subsidizes retail fuel prices through a mechanism
known as the "Compensation Fund". GOM initially
assumed an average price of $35 a barrel for the 2005
budget. The unyielding ascent of international prices
put the country's Compensation Fund in severe deficit
and pressured the GOM to raise fuel prices three times
in 2005.


11. (U) GOM recently negotiated a payment schedule
with the Association of Oil Distributors to close the
deficit of the Compensation Fund. Oil industry
contacts describe the agreement as "acceptable";
however, they also commented that the GOM 2006 budget
assumption of US $60 a barrel, while "more realistic"
than 2005, is still "a bit optimistic". With oil
prices continuing to rise, Oualalou recently announced
GOM's intention to index fuel prices to international
markets, but details on the implementation are still
pending.


12. (U) GOM's cost of living index grew 1% in 2005,
down from a 1.5% rise in 2004. Consumer inflation has
remained below 2% for six of the last eight years.
However, rising fuel prices have been felt acutely in
the transport sector, and continue to raise
inflationary concerns.

Unemployment Increasing


13. (U) GOM fourth quarter 2005 unemployment figures
reached 11.5%, up from 10.4% during the same period in

2004. GOM figures estimate 1.2 million unemployed
among the active population, up from 1.1 million in
2004 (a 15% increase). Urban unemployment increased to
19.4% from 18.0% while rural unemployment increased to
3.6% from 2.5%. Groups most affected by rising
unemployment include urban females (up to 25.8% from
23%) and rural men (up to 3.6% from 2.5%). 13.8% of
urban adults aged 35 to 44 are unemployed (up from
9.6%) along with 5.7% of the active rural population
aged 15 to 24 (up from 3.9%). GOM announced creation
of 258,000 new jobs in 2005, although the number was
not enough to absorb new entrants.


14. (U) The following is a brief summary of
significant economic statistics for Morocco covering
the past five years:

GDP Growth (%)
2000 1.0
2001 6.3
2002 3.2
2003 5.1
2004 4.5
2005 1.8

GDP per Capita (US$)
2000 1200.6
2001 1219.8
2002 1273.5
2003 1517.8
2004 1710.0
2005 1708.0 (estimated)

Exports (m US$)
2000 6952.0
2001 7136.8
2002 7839.0
2003 8771.0
2004 9736.0
2005 10444.4

Imports (m US$)
2000 11513.3
2001 11034.1
2002 11833.3
2003 14559.9
2004 17617.0
2005 20089.9

Private Consumption (US$)
2000 785.5
2001 771.3
2002 799.3
2003 935.5
2004 1070.0
2005 NA

GREENE