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McKinsey: Medium-term development priorities for Morocco

A social Morocco, creator of wealth at regional level, digital and sustainable. These are the priorities in terms of development model that the Kingdom should have, in the medium term, after the Covid crisis, according to an analysis by McKinsey.

The international consulting firm has prepared a document entitled “Perspectives on the economic and social priorities of post-Covid Morocco”.

This analysis on Morocco is a voluntary contribution from McKinsey which is part of a series of analyzes and publications worldwide. Given the firm’s presence in several countries and its exchanges with a wide range of stakeholders, it was able to identify the major global trends that Morocco would benefit from taking into account.

“Beyond the short-term recovery plan, which is necessary to restart the economy, defining the ambition for medium and long-term development is imperative. The crisis reveals and accelerates fundamental economic trends and also triggers new dynamics”, estimates the cabinet which judges the management of the crisis by Morocco very effective (on the health and economic level).

Morocco’s medium-term development priorities (over the next 3 to 5 years), after the end of the Covid crisis, should be as follows, according to McKinsey:

– A social Morocco: quality healthcare system accessible to all, quality school guaranteeing equal opportunities, inclusion of the most vulnerable in society and growth.

– A Morocco that creates wealth at local and regional level: development of supply chains serving local demand, export engines integrated regionally into new channels and a financial sector serving a local, national and regional.

– A digital Morocco: digital transformation of the Administration at the service of citizens and investors, digitalization of the economy and creation of a technological ecosystem, convergence towards an inclusive digital society.

– A sustainable Morocco: Regional leadership in terms of renewable energies, sustainable agriculture and optimized water management, anchoring of the economy in sustainable development.

The bet of growth of 2% to 3% per year, after the crisis

Cross-cutting priorities are also listed: accelerating public and private investment (business climate), strengthening human capital in promising sectors, adapting and simplifying regulations, restoring confidence and promoting national culture.

For each of these priorities, McKinsey proposes a series of actions to be undertaken.

The cabinet specifies that the short and medium term choices will determine the trajectory of the socio-economic indicators of Morocco. He believes that if the priorities and the action plan he suggests are followed, the economy could achieve growth of between 2% and 3% per year, driven by public investment (health and education), local industries and the primary sector.

These proposals stem from the major pre- and post-Covid trends and ruptures, observed at the international level, as well as the risks and opportunities that the current situation poses for Morocco.

Major global trends

5 major global trends are observed:

– Return of the State as an important economic agent with the roles of planner, investor, insurer and / or lender for the management of the post-Covid period. There is also an increase in citizens’ expectations regarding the provision of essential public goods by the state, in particular in terms of health, education and social inclusion, in a context of widening inequalities.

– Sustainable reallocation of household spending in favor of basic necessities, and modification of consumption patterns with an acceleration of the adoption of online commerce.

– Declining trade in goods expected worldwide in favor of a shortening of supply chains and a reconfiguration of industrial value chains towards more resilience and diversification; and strengthening of new strategic sectors (medical equipment, telecommunications, etc.).

– Dramatic acceleration of technological and digital adoption by states, businesses and citizens.

– Growth in demand for green energies driven by the desire to decarbonise developed countries and reinforced by the recognition of the benefits of the pollution reductions recorded during containment; desire for energy empowerment and to take advantage of the recovery to achieve the energy transition, despite the drop in oil prices.

The challenges and opportunities of Morocco

Here are the socio-economic risks and opportunities that they present and that Morocco must seize to reinvent its development model:

– An economic recession expected from 4% to 10% in 2020 alone with significant medium-term impacts on public accounts, the banking sector and the survival of fragile businesses: this constitutes an opportunity to overhaul the economic model by capitalizing on the momentum of current national unity (strengthening of investment, substitution for imports, support for demand, balancing between regions).

– A particularly significant risk for the hard-hit export sectors (tourism, aeronautics, automotive, etc.): this offers opportunities to take advantage of the reconfiguration of European value chains towards more “nearshoring” and resilience to position themselves as a privileged partner in segments with higher added value.

– A social risk with an expected post-Covid level of unemployment of +1 to 2 million people, in particular young people: opportunity to build a new social contract, with an efficient and sustainable social assistance system, the acceleration of financial inclusion, the formalization of jobs and the overhaul of the social protection system.

– Medium-term risks to health and education (worsening of untreated illnesses during confinement, lasting mistrust, post-Covid trauma, dropping out of school, etc.): opportunity to accelerate the digital transformation program (teleconsultations, education in distance, digital public services …) and to strengthen health, education and social protection systems through public investment.

– Risk of slowdown in investments in green energy for the benefit of policies to save the economy: opportunity to consolidate energy autonomy and the position of regional leader thanks to renewable energies by encouraging and accelerating their use (carbon-free industries export, citizens…).

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