In the midst of the Covid-19 crisis, Morocco’s economy experienced a severe recession, recording 581,000 job losses, a debt ratio of 76% of GDP, and between 6.47 and 7.30 billion euros d ‘unpaid bills, the head of the central bank told Parliament. He estimated that growth would not pick up again until 2023.
Tuesday, November 25, during a presentation to members of the Finance Committee at the House of Representatives (the lower house of the Moroccan Parliament), the director of the central bank of Morocco (Bank Al-Maghrib) Abdellatif Jouahri described the critical situation of the country’s economy, reported the Yabiladi news site. He also presented some emergency measures capable of cushioning the shock and creating the conditions for recovery by 2023.
“The economy of Morocco will experience a severe economic recession, a significant loss of employment and an instability of macroeconomic balances”, affirmed Mr Jouahri, adding that “the latest developments of the pandemic, both internally and externally, heightens concerns about the development of this situation”. “Whenever we consult the publications of institutions like the World Bank, the OECD, the watchword is uncertainty,” he said.
Red economic indicators
With the exception of the inflation rate which will remain below 1% in 2020 and 2021, the rest of Morocco’s economic indicators point to worrying levels.
Indeed, according to the official, the unemployment rate is the “real black spot”. “During the third quarter, nearly 581,000 jobs were lost, while the unemployment rate increased by 3.3 points to reach 12.7% nationally,” he explained, adding that “this rate increases to 16.5% in urban areas and 46.7% among young people aged 15 to 24.”
Along the same lines, he warned that “the current account deficit will worsen, while the budget deficit will reach 7.9%, and the debt of the public treasury will climb to 76% of GDP in 2020 before falling back to 75%.”
The banking sector was also affected by the crisis due to the increase in delinquencies and thus the costs of default insurance. “The crisis we are experiencing is not without effect on the banking sector, especially with regard to delinquencies and the costs of risks,” he said, affirming that “at the end of the first nine months, the bad debts increased from 70 to 79 billion dirhams (6.47 to 7.30 billion euros. Editor’s note).”
Taking all these indicators into account, Abdelatif Jouahri estimated that “in the short term, the recovery will be slow in general and will last over time for certain sectors, because it will depend on the evolution of the pandemic and its deadlines”. “Most of the indicators attest to it, we have to wait until 2023 for the recovery,” he said.
Structural reforms are needed
Mr Jouahri recalled that measures were taken quickly to deal with the crisis. They “made it possible to mitigate but we must learn from them and deal with the points of weakness that it has unmasked”, he explained. Among these weaknesses, the disruption of the health system, the impoverishment of a large part of society, the weight of the informal sector and the vulnerability of the productive sector.
Thus, Abdelatif Jouahri pleaded for the establishment of an ambitious program of structural reforms capable of strengthening the resilience of the Moroccan economy. “Without resilience, we will continue to play firefighters and we must remember that things will continue to get worse, with climate change, water stress” he warned, calling on the government to invest in human capital through education and health.
