Morocco: It s oh so quiet Stéphane Colliac Economic Research Department Paris, April 217
Morocco (B1) is given the best Euler Hermes grade all over the African continent Hurdles in Africa #1 Political risk at the root Aftermath of the Arab Spring (political gridlocks and fractionalization of some countries) and Sunni/Shia rivalry (Saudi Arabia vs. Iran) Old cold conflicts warming up again (e.g. Kurds in Turkey and beyond) Political uncertainty on the back of weak economic performance in commodity exporters (South Africa, Nigeria, Ghana, Gabon) Middle East & Africa: country risk and economic growth growth in 217 in light grey Morocco B1 4.5% B3 2.% Tunisia D3.% Egypt Saudi Arabia BB1 1.5% #2 A commodity price/exchange rate issue Despite some oil price recovery, terms of trade heavily cut national savings (about 25% of GDP in Saudi Arabia) Exchange rate policy: Floating exchange rates acted as shock absorbers (South Africa, Egypt) and fixed ones worsened by the sudden stop (Nigeria, Angola) #3 A growing debt pile Vulnerable fiscal policy: Fiscal spending is key for social cohesion, so consolidation is tricky Public debt increased in many Sub-Saharan economies: Either liquidity issues (Ghana, Tunisia) or solvency risks (Mozambique, Angola) Nigeria D3 1.% Angola D3.5% South Africa B2 1.% Kenya C2 6.5% Low risk Medium risk Sensitive risk High risk Source: Euler Hermes Source: Euler Hermes 2
In 217, GDP growth strikes back, as expected Consumption (public & private) was the resilient factor in 216. Growth should be broader-based in 217 In 217Q1, GDP growth accelerated to +4.3% y/y, after +.9% in 216Q4. A good harvest helped agricultural output recover Contributions to GDP growth (%) Value added: agriculture vs. non-agriculture 7 145 Non-agricultural value added y/y change (right) 6% 6 5 2.4 4.5 4.5 4.5 14 Non-agricultural value added Agricultural value-added 5% 4 2.6 135 3 13 4% 2 1.1 125 1 3% 12-1 115 2% -2-3 12 13 14 15 16p 17f Public consumption Private consumption Investment Net exports Inventories GDP growth 11 1% 15 1 % Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Sources: Données nationales, Euler Hermes Sources: IHS, Euler Hermes 3
Current account balance (% of GDP) A balancing act: Exchange rate liberalization The current account deficit is hard to beat. It is consistent with a view that the Dirham is too high GDP growth and current account balance A more flexible Dirham will start to be implemented in June. A +/-2.5% target range is likely Dirham: real effective exchange rate Balanced growth 11 18 Appreciation -2-4 216 21 215 217 218 16 14 12 New currency basket -6 214 29 1 213 28 98-8 -1 212 211 96 Exchange Rate, Reer Based On Rel.Cp, Index Number, Source: 94 92 Fed Tapering Trump Election -12 2 4 6 8 GDP growth (%) 9 88 7 8 9 1 11 12 13 14 15 16 17 Sources: IMF, Euler Hermes Sources: Bloomberg, Euler Hermes 4
Current account (% of GDP) Inflation (%) More exchange rate flexibility is manageable Despite a deterioration of the current account deficit, the import cover of foreign reserves is quite stable: no external liquidity issue External balance: forex reserves and current account Low inflation is a strength. Fiscal consolidation lagged in 216, but financing is not a big issue (S&P affirmed its BBB- sovereign rating) Internal balance: fiscal balance and inflation 4.5-2 215 217 218 4 3.5 28-4 216 21 3-6 214 29 2.5 218-8 213 211 28 2 1.5 212 213 217 215 216-1 212 1.5 211 214 21 29-12 2 4 6 8 1 Import cover -8-6 -4-2 2 Fiscal balance (% of GDP) Sources: IMF, Euler Hermes Sources: IHS, Euler Hermes 5
2,463 2,766 3,96 3,73 4,395 5,37 5,955 7,221 7,8 8,4 In the real economy, the seemingly stability goes along some concerning realities Except for IT services, sector risks remain unchanged. Flop 3 : construction, metal and textile Euler Hermes sector risk assessment An surging number of insolvencies (+21% in 216) related to strong business growth and housing downturn Business insolvencies 9, 8, 7, 6, 5, 4, 3, 2, 1, 29 21 211 212 213 214 215 216 217f 218f Source: Euler Hermes Source: Euler Hermes 6
An additional EUR1.8bn (MAD15.3bn) in goods exports to make in 217, 3 times 216 export gains In 217, good exports should increase by +1%. Demand from African economies is increasing, but remains far below European one Export gains in 217, by destination (M EUR) 7% of export gains will be driven by 3 sectors. Chemicals include pharmaceuticals and fertilizers (phosphate) Export gains in 217, by sector (M EUR) Brazil Western Africa China United States North Africa 41 54 (13 in 216) 58 67 68 (-2 in 216) Ferrous Wood, Paper Non-ferrous Electronic Machinery & Equipment Other 13 19 4 5 71 78 Europe North America Latin America Africa and Middle East Asia Oceania Italy 87 Energy 153 Germany 94 Vehicles 169 India 11 Electric 234 France 423 Spain 64 2 4 6 8 Sources: IHS, Euler Hermes Chemical Textile Agrifood Sources: IHS, Euler Hermes 371 411 474 2 4 6 8 1, 7
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