Despite not possessing hydrocarbon wealth, the economy will remain a relative outperformer in North Africa over the medium term. Investor interest in the country as an export-oriented manufacturing hub for the European market and increasingly to West Africa, as well as relative security compared to the rest of the MENA region, will bode well for Morocco's underlying growth momentum in the next few years. The all-important agricultural sector will nevertheless remain exposed to weather, resulting in significant volatility in headline growth.
Morocco's foreign policy will remain stable over the coming years, aimed at strengthening its relationship with the EU and the GCC and looking to West Africa for trade and investment opportunities. The Western Sahara issue will remain at the forefront of Rabat's foreign policy agenda, and we do not see any significant progress taking place on this issue in the near future.
Morocco will underperform in North Africa in 2016, on the back of a lower than average harvest, which will significantly impact headline growth directly and indirectly through private consumption. We nevertheless maintain a positive outlook for improvements in the external sector, as the country will continue to attract a lot of interest from foreign investors. We forecast real GDP growth to reach 2.0% in 2016, well below the 4.4% estimated for 2015.
The gradual coming on-stream of new energy sources over the next five years - as part of the National Energy Plan 2020 - will reduce pressures on Morocco's current account and boost the country's attractiveness for foreign investors. This structural evolution will benefit the country's economic growth over the next decade.
Average annual inflation in Morocco will remain close to 1.6% over 2016, similarly to 2015, as rising food prices from a lower than expected harvest are compensated by a decrease in household demand. This will allow the Central Bank to maintain its current benchmark interest rate at 2.50% throughout the year.
Our forecasts for both economic activity and fiscal policy assume that Morocco will benefit from significant inflows of foreign direct investment and foreign aid from the Gulf Cooperation Council (GCC) and other organisations over the coming years. Should this fail to materialise, it would pose serious downside risks to the country's outlook.
The export sector remains highly vulnerable to any downturn in eurozone economic growth.
|Real GDP growth, % y-o-y||2.4||4.4||2.0||3.3|
|Nominal GDP, USDbn||109.9||100.5||106.5||117.3|
|Consumer price inflation, % y-o-y, eop||1.6||0.6||2.0||2.0|
|Exchange rate MAD/USD, eop||9.08||9.93||9.55||9.20|
|Budget balance, % of GDP||-4.4||-3.3||-3.1||-2.7|
|Current account balance, % of GDP||-5.5||-2.1||-1.8||-1.6|
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