Poverty and Shared Prosperity in Morocco. Background Note for the CPS 1

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1 Poverty and Shared Prosperity in Morocco Background Note for the CPS 1 Data. Data on poverty and shared prosperity in Morocco are outdated. The measurement of poverty requires at least one household consumption survey while the measurement of shared prosperity requires at least two points in time of the same survey. The latest available household consumption survey for Morocco dates back to 2007 while the last survey before that was carried out in This means that the latest accurate poverty figures for Morocco can only be reported for 2007 while the latest accurate figure on shared prosperity can only be reported for the period More recent information on poverty can be recovered via cross-survey imputation work and using national accounts figures but these sources are not a substitute for household consumption surveys. A recent paper has attempted to estimate poverty figures using labor force survey data (Douidich et al, 2013). This experiment generated quarterly poverty estimates for the period between the last two consumption surveys (2001 and 2007) and until It is also possible to use national accounts figures to monitor the evolution of household final consumption until These figures are not a substitute for poverty estimates but provide a sense of the direction of change in household welfare as measured in National Accounts. Poverty line. The official poverty line in Morocco is rather low. The poverty line set for 2007 was 3,834 MAD per person per year for urban areas and at 3,569 MAD per person per year for rural areas. In 2007, this was equivalent to 1.25 USD per person per day in urban areas and 1.16 USD per person per day in rural areas (non-ppp). ADD Table 1 Poverty Lines 2001, DH/Day/Person 2001 USD/PPP/Day/Person 2007 DH/Day/Person 2007 USD/PPP/Day/Person Poverty Line Urban Rural Extreme Line Poverty Urban Rural Prepared by Paolo Verme (World Bank) and Abdeljaouad Ezzrari (High Commission for the Plan, Morocco) 2 The HCP is currently conducting a new consumption survey but the field work is not expected to be completed before June 2014 and the first results are not expected to be ready before June While this is unfortunate because of the gap in poverty data between 2007 and 2014, this choice was made so as to have census data and consumption survey data for the same year (2014). This is an extremely valuable choice for the poverty mapping exercise which will generate poverty estimates at a very low level of aggregation, otherwise impossible to generate. In substance, Morocco will dispose of a very valuable set of data on poverty in 2015 but, in the meantime, the available data remain largely outdated. 3

2 Household final consumption. Morocco has experienced significant GDP growth between 2000 and 2010, averaging 4-5% per year. Macro indicators would suggest that this growth has trickled down to households. According to national accounts, household final consumption growth has closely followed the evolution of GDP growth with the exception of 2001 (Figure 1). In some years GDP growth was slightly higher than household final consumption growth and in other years the opposite was true but, overall, the two indicators have been remarkably close over the period. Figure 1 - GDP and household consumption growth Source: HCP National Accounts ( ), various publications Poverty. The macro picture is also supported by micro and poverty data. Comparing the 2001 and 2007 household consumption surveys shows that the poverty rate has declined from 15.3% to 8.9% and this has resulted in an effective reduction in the number of the poor from 3.4 million in 2001 to 2.7 million in The Moroccan High Commission for the Plan (HCP) estimates that the poverty rate has declined at an annual rate of -7.3 percent per year as compared to a rate of +2.8 percent for the previous decade. 4 GDP growth over the past decade has clearly been pro-poor reversing the negative trend of the previous decade. Figure 2 Official Poverty Rates Estimates The poverty line in 2007 was set at 3,834 MAD per person per year for urban areas and at 3,569 MAD per person per year for rural areas. In 2007, this was equivalent to 1.25 USD per person per day in urban areas and 1.16 USD per person per day in rural areas (non-ppp).

3 Source: HCP (2012) and 2004 are population census estimates made with poverty mapping techniques. We have some evidence based on modelling that poverty continued to decline in Morocco during the period Figure 3 illustrates the main results of the cross-survey imputation exercise carried out by Douidich et al. (2013) to estimate quarterly poverty rates using labor force survey data. The figure shows the estimations for urban and rural areas using two different estimation models, one based on 2001 data and one based on 2007 data. The two models are consistent in showing a continuous decline in poverty in both urban and rural areas between 2001 and 2007 and beyond 2007 until It is also clear that the decline in rural poverty has been faster than the decline in urban poverty, closing the poverty gap between the two areas. These results are also consistent with Figure 1, where we observed that household final consumption growth continued beyond 2007 and until Figure 3 Quarterly Poverty Estimations,

4 Source: Douidich et al. (2013) Spatial poverty. Morocco experienced declines in poverty and a substantial convergence in poverty rates across all areas during the period All governorates with no exception show a reduction in poverty between 2001 and 2007 (Figure 4). In percentage terms, the governorates with the greatest reduction in poverty were Laâyoune-Boujdour-Sakia El Hamra (-66%) and Oriental (-44%). And the coefficient of variation (a measure of dispersion) estimated across the regional poverty rates declined from 2.3 in 2001 to 1.8 in 2007 indicating that convergence in poverty rates has occurred. However, regional diversity in terms of poverty remained sharp in 2007 (Figure 5). According to the poverty map produced by the HCP, the most impoverished governorates of the country in 2007 were Gharb-Chrarda-Beni Hssen and Doukala-Abda with values around 15%. This is in striking contrast with governorates like Laâyoune Boujdour Sakia El Hamra or Oued Ed Dahab Lagouira where the poverty rate in 2007 was well below 3%. Also, poverty remained higher in rural areas as compared to urban areas in all governorates with the exception of Oued Ed Dahab Lagouira. Figure 4 Spatial Poverty

5 Figure 5 Spatial Poverty 2007 Source: Re-elaborated from: Shared prosperity. The indicator of shared prosperity has been very positive for the period Shared prosperity is defined as the annualized growth rate of wellbeing of the bottom 40% of the population in real terms. We estimated this rate at 3.27% between 2001 and 2007 based on the same

6 consumption data used by the HCP. The Moroccan High Commission for the Plan (HCP) estimated that household consumption in real terms has increased at an average rate of 2.8 percent a year between 1999 and 2007 as compared to -1.8 percent for the previous decade. This means that the annual welfare growth of the bottom 40% for the period has been higher than the one estimated by the HCP for the whole population between 1999 and Therefore, GDP growth has been pro-poor in both absolute (the wellbeing of the poor has improved) and relative (the wellbeing of the poor has improved relatively to the wellbeing of the non-poor) terms. Unfortunately, no other estimates on shared prosperity are available for the post-2007 period which coincided with the global recession. Pro-poor policies. The impact of public policies on poverty is difficult to establish and we are not aware of accurate evaluations that have been conducted for this purpose in Morocco. We can only list here a number of macro and social policies that are expected to have contributed to the observed reduction in poverty. Morocco has been quite active in terms of macroeconomic policies. Starting from the mid-1990s, the government has launched ambitious macroeconomic reforms coupled with stabilization measures. The macroeconomic policies include regulatory and institutional improvements to attract foreign investments, price liberalizations, acceleration of the privatization process, better competition laws, a better framework for SME development and a progressive opening of the economy to global trade. The country joined the WTO and signed bilateral trade agreements with the US, the EU, and several non-eu Mediterranean countries. Stabilization policies aimed at consolidating public finance, controlling inflation, and reducing the debt/gdp ratio. All of these objectives were largely achieved by A large program of infrastructure development accompanied these reforms with the aim of closing the gap between urban and rural areas, and developing the growth potential of more remote areas. On the social and microeconomic side, a number of programs with the objective of reducing poverty have also been launched. These include the development plan, the fund for the fight against droughts and desertification, the fight against analphabetism, the work of the foundation Mohamed V for solidarity, the work of the agency for social development and the national agency for employment and skills promotion, several initiatives for microcredits promotion and the national charts for education and health. In addition, the launch of the National Initiative for Human Development (NIHD) in 2005 an ambitious national plan to develop the poorest areas of the country marked an important step forward in addressing the wider spectrum of deprivation. References Douidich, M., Ezzrari, A., Van der Weide, A. and Verme, P. (2013) Estimating Quarterly Poverty Rates Using Labor Force Surveys: A Primer. World Bank Policy research Working Paper No High Commission for the Plan (2010) Carte de la pauvreté 2007,