Operating Environment Overview – Moroccan Banking Institutions (Jun 2022)

Morocco is the most westerly of the North African countries known as the Maghreb (“Northwest Africa’ or ‘the Arab West”), with a population of 36.7m. Morocco is uniquely positioned on the Mediterranean as a bridge between Africa, the Middle East, and Europe. The country has diversified its commercial and economic partners, and today is the gateway to a market of 1.5bn consumers according to the International Monetary Fund (“IMF”). However, the journey to a more robust, diversified economy has not been easy due to Morocco’s relatively small, oil and rain dependent economy that has proved vulnerable to external shocks, including the global financial crisis of 2008 and more recently, the economic fallout from the COVID-19 pandemic. Traditional sectors such as agriculture, fishing, and tourism have been buoyed by the impressive growth of phosphates, chemicals, and the auto sector. The auto sector has been the leading export sector in the country in recent years. Morocco’s automotive sector has three original equipment manufacturers (“OEM”) with an installed capacity of 700,000 vehicles making it the leading automaker in the Middle East and North Africa. The economy registered positive real GDP growth of 6.3% in 2021, after contracting 6.3% in 2020 (growth was 2.9% in 2019), due to the combined effect of the drought (that affected agricultural production) and the COVID-19 pandemic. Economic growth in 2021 was driven by continued fiscal and monetary stimulus, the rebound of exports, buoyant remittances, and the exceptional harvest following two years of drought. The IMF projects GDP growth at around 3% for 2022, as agriculture output returns to average levels and non-agricultural activity continues to recover. Downside risks to the outlook include the evolution of the COVID-19 pandemic in Morocco and its main trading partners. In 2020, the government received USD3bn funding from the IMF to limit the social and economic impact of the COVID-19 pandemic and allow Morocco to maintain an adequate level of official reserves to mitigate pressures on the balance of payments.

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