- Moroccans should be happy to note that economic growth this year will be very strong compared to poor results last year. However, Morocco being considered an emerging economy, living standards are developing very slowly. The Kingdom is still the poorest in North Africa and citizens see little to growth.
According to an economic analysis of developments in Morocco made in the journal 'IMF Survey' - published by the International Monetary Fund (IMF) - the Kingdom is currently experiencing its strongest growth in years. Real GDP is projected to grow by an impressing 7.3 percent this year, by far outweighing Morocco's low population growth rate set at around 1.6 percent. Last year, the economy only grew by 1.6 percent, according to Moroccan authorities and IMF staff estimates.
"A bumper wheat crop and strong activity in services and construction are ushering in a recovery, following a slowdown in growth caused by bad weather in 2005. Inflation remains low," the IMF says. "Macroeconomic conditions continue to strengthen and the 2006 outlook is favourable," the Fund further optimistically notes.
Despite the impressing 2006 growth rate, the IMF indicates average Moroccans will have little reason for joy. "Morocco has started to reap the benefits of its reform efforts, but raising living standards to the level observed in other emerging economies still constitutes a challenge," the IMF analysis says, without giving further details.
More details are however found in the UN's recently released Human Development Index (HDI) for 2006, where Morocco only ranks 123rd out of 177 countries. All other North African countries have a far higher "human development", which includes factors such as health, education and purchase power among citizens.
While Morocco scores well on the HDI's life expectancy at birth - set at 70 years - other indicators are very poor, on line with sub-Saharan Africa. Per capita purchase power is only at US$ 4,300, adult literacy at a little over 50 percent and the school enrolment rate at only 58 percent. Around 20 percent of Moroccans do not even have access to safe drinking water, the UN report reveals. Great gender gaps in education make the situation worse.
Despite this welfare problem and the failure to raise living standards, the IMF and Moroccan authorities have agreed on not putting emphasis on further social spending. Indeed, state subsidies on food and petrol are to be strongly reduced and Rabat authorities had agreed to start "curbing wage bill growth through an early retirement scheme." Taxes, on the other hand, were to be raised.
"Fiscal consolidation should be the top policy priority," the IMF analysts held, and they welcomed "ongoing efforts to broaden the tax base and increase revenue, and supported the possible transition to a flexible exchange rate regime." According to the IMF, Moroccan authorities had agreed that the most pressing problem was not the country's low living standards, but "to reduce the fiscal deficit to 3 percent of GDP and the public debt-to-GDP ratio below 60 percent by 2009."
The fiscal deficit, the Fund held, was likely to be close to the 2006 budget target of 4.1 percent of GDP - down from 5.9 percent in 2005 - "because of expenditure pressures related to oil and food subsidies." Rabat authorities planned to "continue to gradually align domestic petroleum prices with international prices and to reduce the fiscal cost of food subsidies by better targeting them to the most vulnerable groups."
All in all, this was to secure "increased employment and reduce poverty," the IMF analysis held. The IMF staff made no mention of the need for more spending on education and health, in contrast to UN priority indications for Morocco, when it came to raise welfare among citizens.
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