Morocco Country Report

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The establishment of special commercial courts in 1997 led to some improvement in the handling of commercial disputes. In 2009, the National Committee for the Business Environment was created in partnership with the private sector, and it has worked to identify needed reforms and raise awareness of business environment issues nationally and internationally (U.S. Department of State, 2015). Currently, commercial disputes between companies do not consume too much time and resources to solve, and arbitrary authority is making progress to foster the principle of impartiality in business.

In 2015, Morocco moved down to the 88th place out of 168 countries (80th in 2014) on Transparency International’s Corruption Perception Index (Transparency International, 2015). Any company doing business in Morocco needs to be aware of the fact that corruption remains a major problem, and it is partly due to the low salaries in the public sector and loose control of the government. All businesses in Morocco should cooperate with each other to terminate the corruption from its roots by creating a fair competitive environment.

III. Economic Overview

The Gross Domestic Product (GDP) in Morocco was $107 billion in 2014. The GDP value of Morocco represents 0.17% of the world total GDP. As Figure 2 shows, Moroccan economy is growing continuously due to significant progress in implementing economic reforms in last year. It advanced 4.7% year-on-year in the three months leading up to December 2015 (Reuters, 2016). The fast-growing economy has been attracting many service businesses, such as finance and telecommunications companies, to enter Morocco’s appealing market. As Figure 3 shows, the service sector comprises the highest share (57.7%) in Morocco’s GDP, especially retailing, tourism, and telecommunication. Morocco is regarded as a service-based economy. There is a strong demand for services in Morocco, and the service sector provides great support to other sectors and boosts Morocco’s social and economic development. [pic 2]

Agriculture is another crucial component of the economy, which contributes 13% of the GDP, and 40% of the labor force is involved in agricultural production, making agricultural sector Morocco’s largest employer. The main driver of the GDP volatility in Morocco has been the weather factor. Due to the adverse weather effect on agricultural output at the end of 2015, economic growth is expected to slow to 2.6% in 2016 (Reuters, 2016). [pic 3]

Industry contributes about one-third (29.3%) of the annual GDP, which is made up of phosphate mining and processing, construction, and manufacturing. Morocco’s industrial production growth is continuing to grow at 1.6% per year. Morocco has 37 industries and mining is the largest one among those industries. It is also the largest foreign exchange earner in Morocco. It accounts for 35% of foreign trade and roughly 6% of the country’s GDP. The country possesses 75% of the world's phosphate reserves, which are used in agriculture and industry, and is the world’s leading exporter and third largest producer of this mineral. Morocco also has large deposits of antimony, anthracite, barite, copper, cobalt, lead, iron ore, silver, salt, and zinc (Bloomberg Business, 2010). Morocco has become an appealing international mining market due to its abundance mineral resources.

Inflation rate (% change in the Consumer Price Index) in Morocco fell to 0.4% in 2014 from 1.9% in 2013 (World Bank, 2015). Morocco’s inflation has been moderate at 1-2% per year over the past five years. Such low inflation has been beneficial for the economy. It is encouraging people to buy goods and services in the market, and the cost of food and fuel is bringing down the cost of living. The modest inflation has been a pro-business factor, since interest rates has been low during this period.

Morocco’s central bank cut its benchmark interest rate to 2.5% from 2.75% on December 16th, 2014 (Reuters, 2015), encouraging borrowing to make purchases and investments. This is also a positive for companies, such as automobile and manufacturing industries, because people have more money to spend, which can create additional consumption in the economy.

Over two-fifths of Morocco’s working population remains in agriculture, while a third works in the service sector. The remainder is mostly employed in mining, manufacturing, and construction industries. Unemployment Rate in Morocco increased to 10.2% in 2014 from 9.2% in 2013. As the economy continues to modernize, industries and service sectors may absorb workers, but many of other workers lost their jobs in the agricultural sector, especially in the rural areas (Quandl, 2015)

IV. Trade

Morocco is the 71st largest exporter and the 58th largest importer in the world. In 2013, Morocco exported $21.96 billion and imported $45.18 billion, resulting in a negative trade balance of $23.22 billion. As Figure 4 shows, the growth rate of Morocco’s trade value has been increasing steadily since 2011. The exports are led by Phosphoric acid, which represents 10.1%, followed by ignition wiring sets, which account for 6.51%. The most recent imports are led by refined petroleum that represents 9.2%, followed by crude petroleum, which accounts for 8.57% (WITS, 2013).[pic 4][pic 5][pic 6]

The top export destinations of Morocco are Spain ($4.71 billion), France ($4.14 billion), Brazil ($1.31 billion), and the United States ($0.92 billion). The top import origins of Morocco are Spain ($6.11 billion), France ($5.84 billion), the United States ($3.39 billion), and China ($3.13 billion). Spain and France are Morocco’s top trade partners, which is the result of Morocco’s geographical proximity to Europe and Morocco’s past under Spanish and French protectorates (WITS, 2013).

The currency of Morocco is the Dirham. Morocco guarantees full currency convertibility for capital transactions, free transfer of profits, and free repatriation of invested capital. Foreign investments financed in foreign currency can be transferred tax-free, without amount or duration limits. Meanwhile, Morocco maintains an exchange rate peg, which was set at an 80/20 split Euro/Dollar until April 2015, and has recently been reallocated to a 60/40 Euro/Dollar basket, reflecting evolving trade relations (U.S. Department of State, 2015). The peg helps finance service businesses, such as UBS, to achieve superior foreign exchange service. Spot, forward and foreign exchange swap trades, and option trades will have great potential to develop in the future.

By 2014, Morocco became the second-largest destination for FDI in North Africa and the third-largest recipient of FDI