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Growth in Morocco is expected to slow to 1.1% in 2022, the World Bank said Thursday, April 14 in a new report on the Mena region.
In detail, agricultural production is expected to decrease by 17.3% due to the drought. The economy should be driven by a still solid but moderate industrial performance and a faster recovery in tourism.
Ongoing reforms should increase potential growth in the medium term, the institution says. Furthermore, the budgetary impact of the health and social protection reform and the pressures on the compensation fund will slow down the consolidation of the budgetary deficit (6.2% of GDP in 2022). Public debt should stabilize below 80% of GDP. The current account deficit is expected to widen to 5.5% of GDP due to the rising energy and food import bill.
This outlook is subject to various downside risks. This is the war in Ukraine which is driving up world commodity prices, which, combined with the drought, could increase Morocco’s import bill and public subsidies, thus impacting the current account and the budget balance. A weaker recovery could put further pressure on the debt servicing capacity of households and businesses.
Inflationary pressures could force the central bank to raise rates, which, together with changes in the monetary stance of advanced economies, would tighten public and private sector financing conditions. Rising prices and falling farm incomes are expected to slow the post-COVID-19 normalization of socio-economic conditions. Poverty and extreme poverty are expected to stagnate at best in 2022 and will not return to pre-COVID-19 levels until 2023.
Given the inflationary pressures, especially for food and energy products, as well as the effects of the severe drought, measures to support the most vulnerable as well as the planned broader social dialogue will be important steps for the government to take.
