Viral Effect

COVID-19 aside, Morocco’s export activity has faced certain difficulties over the years that could be mitigated through economic diversification.

• Focus: Exports

MOROCCO’S INCREASINGLY privatized economy since the 1980s has sought fresh investment opportunities, including foreign sources to develop export options. Meanwhile, existing potential is being tapped in traditional and less traditional sectors alike.

DIVERSIFYING FOR EXPORT POTENTIAL

A major economic hurdle has been dependency on the export of raw materials, and consequent susceptibility to global commodity price fluctuations. Since assuming control of the Western Sahara, Morocco has around two-thirds of global phosphate reserves; a material input of fertilizers and other commodities. And while barite, manganese, lead, and zinc enjoy limited export volumes, iron ore and coal deposits are directed to the domestic market. These industries require substantial energy input, another key problem. Oil and natural gas exploration have been limited in nature.

Fortunately, there has been a shift in direction in recent decades whereby innovative export sectors have come to the fore. Notable among these are tourism and telecommunications. Tellingly, while employing just a third of the workforce, they account for over twothirds of GDP. In 1999, the government introduced a loan fund to catch the potential of such sectors, notably the SME component.

BY THE NUMBERS

In 2019, total exports claimed 8.9% of GDP at USD328.7, down from 9.3% for 2018. Of total exports 73.8% went to Spain (24.1% of global total), France (21.6%), Italy (4.7%), the US (4%), Germany (3.2%), Brazil (2.9%), India (also 2.9%), Netherlands (2.7%), the UK (2.5%), Turkey (2.2%), Belgium (1.6%), and Portugal (1.5%). The next two largest export destinations were Asia (12.2%) and Africa (7.8%).

The top 10 export products accounted for roughly three-quarters of total export by value. The top five were electrical machinery and equipment on USD5.3 billion (18.1% of total), vehicles on USD3.8 billion (13%), fertilizers on USD2.9 billion (9.9%), clothing and accessories on USD2.4 billion (8.3%), and inorganic chemicals on USD1.43 billion (4.9%).

BANKING ON THE GREEN

Agricultural output has grown by 60% since the Green Morocco plan of 2008, the plan being for it to lead the economic advance over the subsequent 15 years by GDP growth, job creation and exports. Drought every three years or so blights the sector, which employs two thirds of the working population. This year, drought slashed the local cereals harvest by 39% prompting a jump in soft wheat and barley imports.

Increased efficiency and supports led to a 97% rise in Morocco’s agricultural exports in the 2010-2019 period at over 3 million tons according to Morocco’s export agency Foodex. In 2018, they accounted for 21% of total exports, yet agriculture generates just 14% of GDP underscoring Morocco’s need for export diversification. Fruits and nuts was the prominent export category of 2019, up 14.4% YoY followed by aircraft and aerospace up 8.3% and electrical machinery and equipment up7.6%. Yet the worst fall of 8% YoY was in the seafood category. For 9M20 agriculture and food industries were down 1.1% with sales of USD4.93 billion.

Seafood, frozen and canned, is a particularly interesting export proposition given available coastal resources. For 9M20, fisheries exports had risen 7% YoY to 570,000 tons, notably to Mauritania, the US and Ghana, according to the agriculture and

fisheries ministry.

Tourism, accounting for 7% of GDP is an export revenue source of potential. While in 2019 13 million tourists arrived, COVID has dented revenues in 2020 by USD2 billion. Half a million people staff the sector, which has only compounded the national unemployment rate of 18%. By end September 2020 tourism revenue had lost 59.5% to USD2.65 billion.

THE COST OF COVID-19

The numbers are predictable. 9M20 exports of USD20.53 billion were down 11.8 % YoY. A 5.8% economic contraction is forecast for 2020 on a fiscal deficit of 7.5% of GDP. In May, the Ministry of Economy and Finance announced that two months of confinement had cost key export sectors dearly. The Aeronautics industry had shed 81% in April following a 52% drop in March. The Electronics sector fell 93% in April after a 51% slump in March. Textiles output plunged 86.5% during April after a 40% slide in March. And in July of 2020, King Mohammed VI revealed Morocco’s recovery plan for the most impacted economic sectors, involving a USD12.8 billion injection to the economy.

For 9M20, imports of USD33.4 billion were down 16.2%, with exports down 11.8% YoY to USD20.32 billion. Nascent recovery was observed in early July and late September when exports and imports respectively gained 19.4% and 8.1%. Between September 2019 and September 2020, Morocco’s exported services decreased by 35.1%, while imports declined by fell 26.8%.

The pandemic is an undeniable disaster all round, and yet national recovery plans will kick in to promote key export sectors once the world declares normality, new or otherwise.