 Program Description
Current Situation
Morocco faces the challenges typical in developing countries - restraining government spending, reducing constraints on private activity and foreign trade, and achieving sustainable economic growth. Although Morocco has been able to sustain positive growth in GNP, the rate fluctuates due to an agricultural sector that depends on uncertain rainfall. GDP in 2005 was $52 billion and GDP per capita was $1,725. The estimated GDP growth rate for 2006 is 6.7 %, thanks to high rainfall, which resulted in a strong second harvest. However, the current rainy season has been very poor. The share of agriculture in the GDP is 13.3%, with an industry share of 31.2% and a services share of 55.5%.
Poverty and unemployment are two of the greatest challenges facing the Moroccan economy. Although the overall unemployment rate is estimated at 10%, it nears 16% in urban areas and is over 30% among urban youth. In addition, some 40% of the population depends on agriculture for a living, a sector that only contributes 13% of the GDP. Thus, the number of people dividing this small pie keeps poverty in rural areas high, posing a formidable obstacle to economic growth in these areas. Overall some 19% of the population is estimated to live below the poverty line. Unemployment and underemployment drives this poverty, which in great part stems from a lack of education and vocational training. This void keeps young Moroccans from finding gainful employment in both the urban and rural regions.
Morocco’s foreign trade situation is characterized by a significant imbalance, with imports estimated at $21.2 billion in 2006 and exports of only $11.7 billion. Major exports are clothing, fish, inorganic chemicals, electronic parts, fertilizers, phosphates, petroleum products, fruits, and vegetables. Major imports are crude petroleum, textile fabrics, telecommunications equipment, wheat, gas, electricity, transistors, and plastics. European Union countries are Morocco’s main trading partners. In spite of the trade deficit, Morocco is able to maintain a small positive current account balance thanks to tourism and substantial remittances from Moroccans living and working abroad.
In January 2006, the bilateral Free Trade Agreement (FTA) between the United States and Morocco went into effect. The U.S.-Morocco FTA eliminated tariffs on 95% of bilateral trade in consumer and industrial products with all remaining tariffs to be eliminated within nine years. The negotiations produced a comprehensive agreement covering not only market access but also intellectual property rights protection.
Whereas the opening of markets encompassed in the FTA offers new opportunities to sectors of the Moroccan economy, it also presents challenges to the less competitive sectors. At present resources in the agricultural sector are heavily invested in commodities such as wheat and sugar, in which Morocco is not competitive. More resources and new investments should be directed into value chains in which the country is, or could be, competitive in the international market or even in an open domestic market. To benefit from the FTA, Moroccan firms currently exporting to Europe need to adapt to the requirements of the American market. And finally, Morocco needs to attract the foreign and domestic investments that will enable its economy to adapt to and benefit from the changing global market. |
