Sunday, November 10, 2019
Development in Moroccan Economy Essay
Economic Environment Development of the Moroccan Economy The Moroccan economy is known for its macroeconomic stability. Inflation rates have always been relatively low, mainly due to the countryÃ¢â¬â¢s restrictive currency regime. Morocco has been characterised by moderate to high growth rates. The country has benefited from its low labour cost and strategic location near the European mainland. Morocco has experienced a stronger growth than usual since the year 2000, caused by improved weather conditions, a strong export growth and various liberalizing policies. These liberalizing policies have been introduced by King Mohammed VI in 2003. He came up with a number of economic reforms resulting in a growth of the small modern manufacturing sector and the development of the tourism industry. He has put his main focus on the European Union since the Free Trade Agreement in the year 2000. MoroccoÃ¢â¬â¢s Gross Domestic Product (GDP) has steadily gone up since 2002. According to statistics of Ã¢â¬Å"Datamonitor 360Ã¢â¬ the GDP in 2002 was about 40 billion dollar, in 2010 the GDP had grown to approximately 60 billion dollar. That is a rise of 50% in only eight years time. The World Factbook from the CIA mentions that in 2010 Morocco ranked number 58 in the world when it comes to the GDP. The real GDP growth rate has not been negative since 2002. In 2010 Morocco ranked number 77 in the world of real GDP growth. The lowest growth rate was about 2,5% in 2005 and 2007 and peeked with 7,5% in 2006. This could have possibly been caused by the Free Trade Agreement with the United States of America, which was introduced in 2006. I will further explain the results of the Free Trade Agreement with the EU and the USA later on in this chapter. The three main sectors: industry, service and agriculture, all grew steadily the past ten years. In 2009 the service sector was the biggest sector and contributed 49,4% to the GDP, the industry sector came second with 31,3% followed by the agriculture with 19,2%. Morocco has a profitable industry sector, mainly because of its large amounts of phosphate. Tourism plays a big role in the service sector. The tourism industry has remained vibrant despite the Casablanca bombings in 2003 and 2007. MoroccoÃ¢â¬â¢s external trade has also been increasing steadily, with only a slight decrease in 2009. However, the total external trade still grew from 25,7 billion dollars in 2002 to 77,6 billion dollars in 2009. This is a growth of 51,9 billion dollars, which is a growth percentage of approximately 202%. Even though MoroccoÃ¢â¬â¢s economy has been doing well the past decade, the unemployment rate is still relatively high. During the period from 2002 to 2008 the unemployment rate was at least 11%. In 2007 a small decrease of unemployment of 300 thousand took place, still leaving 1,1 million people unemployed. By the end of 2008 the unemployment rate was 9,6%. In 2009 a total of 93,000 new jobs got created resulting in a decrease to 9,1% by the end of 2009. We can conclude that the overall Moroccan economy has shown a fairly good development, but there is still a lot more to improve. The government has been working on new reforms that should lead to better business conditions in the country. International Financial Crisis Morocco together with Algeria and Tunisia has been one of the least affected countries by the international financial crisis. The international financial crisis started with the credit crunch in the US. Morocco has not been affected by this so-called credit crunch, because Morocco does not have the kind of credit that caused the American credit crunch. Besides this Morocco had minimal exposure to foreign assets. Morocco did however get affected by the international financial crisis as soon as it hit Europe. The Western European crisis resulted in diminishing growth rates. The crisis in Europe did not only slow down Moroccan export rates, but also the tourism industry. As European unemployment rates increased, many Moroccans working abroad lost their jobs, causing a decline in remittances. Morocco has been able to keep the negative effects of the international financial crisis to a minimum due to its good macroeconomic policy, an open economy, clear trade policies and several investment opportunities with emerging countries in Asia, Latin America and Africa. Because of the effects the financial crisis has had in Europe and the US, Gulf investors are expected to invest in African countries and the Middle East. At the end of 2008 Gulf investors announced a 1,7 billion US dollar investment in real estate in Morocco. These investments and planned reforms will make sure the Moroccan economy will continue to grow in the future. Effects FTA US and EU MoroccoÃ¢â¬â¢s economy has largely benefited from the free trade agreements it has made with the European Union and the United States. In 1996 Morocco signed an association agreement with the European Union. The association became effective on March 1, 2000. The free trade agreement with the EU is mainly applied on industrial products and hardly any agricultural products. The objective is to have completely free trade between Morocco and the EU by 2012. In 2010 the EU proposed a new trade deal with Morocco to include duty-free trade in agricultural, food and fisheries products. On June 15, 2004 Morocco also signed a free trade agreement with the USA, which became effective on January 1, 2006. For America this was the second Arab-US free trade agreement and the first African-US free trade agreement. During a video of the Ã¢â¬ËMoroccan American Trade and Investment CouncilÃ¢â¬â¢ the counsellor to King Mohammed VI for financial and economic affairs says about the FTA with the US: Ã¢â¬Å"We want to put Morocco as a platform for business with Europe, with the US, with Asia, China, Africa, Middle East. It was part of a global vision of Morocco. Ã¢â¬ Mr. Hassan, the president of the Moroccan Business Association says during the same video Ã¢â¬Å"The Morocco Ã¢â¬â US free trade agreement is a great opportunity for the Moroccan economy. Ã¢â¬ Due to the free trade agreements many American and European businesses have opened establishments in Morocco. These businesses have employed thousands of Moroccans causing a decline in the unemployment rate of the country. Both free trade agreements have been a huge step in the right direction for Morocco. The country still has a lot of poverty and unemployment; much more is needed to solve the countryÃ¢â¬â¢s issues. However, the country is one of the most stable African and Arab nations. Current Economic System Morocco has a relatively liberal market economy regulated by supply and demand. From 1993 onwards there has been a policy of privatization. The heritage foundation, a research and educational institution, has come up with an index of economic freedom. This index makes it possible to measure the economic freedom in countries around the world. The world average score on the index of 2011 is 59. 7 out of 100 points. MoroccoÃ¢â¬â¢s overall score is 59. 6, only a tenth point under the world average. Morocco is the 93rd country on the 2011 world rank of economic freedom. The regional average of the Middle East and North Africa is 60. 6, which makes Morocco the 10th country on the list of 17 regional countries. The overall score is determined by ten economic freedoms. In figure below the ranking of all ten separate economic freedoms of Morocco compared to the world average is shown. The most important economic freedom for this specific country report is business freedom. The business freedom represents the procedures for setting up and registering a private enterprise and the possibilities of private investment and production. In figure you can clearly see the Moroccan business freedom compared to the Dutch business freedom. King Mohammed VI has come up with many economic and non-economic reforms over the years. The two largest current reforms are the Ã¢â¬Å"Plan Maroc VertÃ¢â¬ (Green Plan) and the Ã¢â¬Å"Plan EmergenceÃ¢â¬ .