The economic system of the country presents several facets. It is characterized by a large opening towards the outside world. France remains the primary trade partner (supplier and customer) of Morocco. France is also the primary creditor and foreign investor in Morocco. In the Arab world, Morocco has the second-largest non-oil GDP, behind Egypt, as of 2005.
Among the various free trade agreements that Morocco has ratified with its principal economic partners, are The Euro-Mediterranean free trade area agreement with the European Union with the objective of integrating the European Free Trade Association at the horizons of 2012; the Agadir Agreement, signed with Egypt, Jordan, and Tunisia, within the framework of the installation of the Arab Zone of Free Exchange; the US-Morocco Free Trade Agreement with USA which came into force in January 1 2006 and lately the agreement of free exchange with Turkey. (See section below)
This is a chart of trend of gross domestic product of Morocco at market prices estimated by the International Monetary Fund with figures in millions of Moroccan dirhams.
|Year||Gross Domestic Product||US Dollar Exchange||Inflation Index (2000=100)|
For purchasing power parity comparisons, the US Dollar is exchanged at over 8 Dirhams. Average wages in 2007 hover around $11-14 per day.
Since the early 1980s the Moroccan government has pursued an economic program toward these objectives with the support of the International Monetary Fund, the World Bank, and the Paris Club of creditors. The country's currency, the dirham, is now fully convertible for current account transactions; reforms of the financial sector have been implemented; and state enterprises are being privatized.
Drought conditions depressed activity in the key agricultural sector, and contributed to an economic slowdown in 1999. Favourable rainfalls have led Morocco to predict a growth of 6% for 2000. Formidable long-term challenges include: servicing the external debt; preparing the economy for freer trade with the EU; and improving education and attracting foreign investment to improve living standards and job prospects for Morocco's youthful population.
Macroeconomic stability coupled with relatively slow economic growth characterize the Moroccan economy over the past several years. The present government has introduced a number of important economic reforms over the past several years. The economy, however, remains overly dependent on the agriculture sector. Morocco's primary economic challenge is to accelerate growth in order to reduce high levels of unemployment.
Through a foreign exchange rate anchor and well-managed monetary policy, Morocco has held inflation rates to industrial country levels over the past decade. Inflation in 2000 and 2001 were below 2%. Despite criticism among exporters that the dirham has become badly overvalued, the current account deficit remains modest. Foreign exchange reserves are strong, with more than $7 billion in reserves at the end of 2001. The combination of strong foreign exchange reserves and active external debt management gives Morocco the capacity to service its debt. Current external debt stands at about $16.6 billion.
Economic growth, however, has been erratic and relatively slow, partially as a result of an over-reliance on the agriculture sector. Agriculture production is extremely susceptible to rainfall levels and ranges from 13% to 20% of GDP. Given that 36% of Morocco's population depends directly on agriculture production, droughts have a severe knock-on effect to the economy. Two successive years of drought led to a 1% incline in real GDP in 1999 and stagnation in 2000. Better rains during the 2000 to 2001 growing season led to an 6,5 % growth rate in 2001. Growth in 2006 went above 9%, this was achieved by a booming real-estate market.Over the long term, Morocco will have to diversify its economy away from agriculture to develop a more stable economic basis for growth.
The strongest point of Moroccan industry is phosphate mining near Khouribga and in Western Sahara. Morocco controls approximately two thirds of the world's phosphate reserves, placing it in a higher league than its major competitors, the People's Republic of China, Russia, and the United States. Although it employs only 2% of the population, phosphate mining is responsible for half of the nation's income.
The current government has introduced a series of structural reforms in recent years. The most promising reforms have been in the liberalization of the telecommunications sector. This process started with the sale of a second GSM license in 1999. In 2001, the process continued with the privatization of 35% of the state operator Maroc Telecom. Morocco has announced plans to sell two fixed licenses in 2002. Morocco also has liberalized rules for oil and gas exploration and has granted concessions for many public services in major cities. The tender process in Morocco is becoming increasingly transparent. Many believe, however, that the process of economic reform must be accelerated in order to reduce urban unemployment below the current rates above 20%.
Morocco has signed Free Trade Agreements with the United States of America and the European Union. The agreement with the United States has been ratified on July 22, 2004 in the United States Senate, by a vote of 85 to 13, while the agreement with the EU is to take effect by 2010.
Agriculture industry in Morocco enjoys a complete tax exemption. Many Moroccan critics say that rich farmers and large agricultural companies are taking too much benefit of not paying the taxes, and that poor farmers are struggling with high costs and are getting very poor support from the state.
There are hundreds of thousands of hectares of high quality land that is not being exploited and is in the hands of the Moroccan state. These lands were acquired from former French farmers/colonists that left Morocco after the Independence in 1956. The State refuses to return the lands to the original Berber owners. Instead, the State tends to give many hectares of land as rewards to retired politicians, high ranking officials and even to national athletes.
Morocco consistently ranks among the world's largest producers and exporters of cannabis, and its cultivation and sale provide the economic base for much of northern Morocco. The cannabis is typically processed into hashish. This activity represents 0.57% of Morocco's Gross Domestic Product (GDP). A UN survey in 2003 estimated cannabis cultivation at about 1340 km² in Morocco's five northern provinces. This represented 10% of the total area and 23% of the arable lands of the surveyed territory and 1% of Morocco's total arable land. Morocco is a party to the 1988 UN Drug Convention and in 1992 Morocco passed legislation designed to implement it and its new national strategy against drugs formulated by its National Committee on Narcotics was adopted in 2005. That same year, the International Narcotics Control Board commended the Government of Morocco for its efforts to eradicate cannabis plant cultivation on its territory, which has resulted in the total potential production of cannabis resin in the Rif region decreasing by 10 per cent over the previous year. At the same time the board called upon the international community to support its efforts where possible.
The country is the largest fish market in Africa, with an estimated total catch of 1,084,638 MT in 2001. A new four-year fishery agreement with the European Union will allow European vessels, mostly from Spain, to operate in Moroccan and Western Saharan waters in exchange for an economic compensation programme, which the National Fishery Office of Morocco intends to use to boost modernisation of its domestic fishery sector. There have been constant disputes with Spain over fishing rights since 1973 when Morocco declared a Exclusive Economic Zone (EEZ), resulting on a coastal fishing limit. This was extended to 200 nautical miles (370 km) in 1981. This "fish war" with Spain and the EU made daily headlines in Morocco.
It is also the largest almond producer in Africa, amounting to 1.7% of the world production, about 6,000 tonnes in kernels, marketed only for the domestic market.
In 2000, industry accounted for one-third of GDP, and industrial output rose 3.5%. Leading industrial sectors in 2002 were phosphate rock mining and processing, food processing, leather goods, textiles, and construction. Morocco holds the world's largest phosphate reserves. Phosphate is mainly found in the west region of the country.
The manufacturing sector produces light consumer goods, especially foodstuffs, beverages, textiles, matches, and metal and leather products. Heavy industry is largely limited to petroleum refining, chemical fertilizers, automobile and tractor assembly, foundry work, asphalt, and cement. Many of the processed agricultural products and consumer goods are primarily for local consumption, but Morocco exports canned fish and fruit, wine, leather goods, and textiles, as well as such traditional Moroccan handicrafts as carpets and brass, copper, silver, and wood implements.
There are two oil refineries, one at Mohammedia and one at Sidi Kacem, with a total refining capacity of 155,000 barrels per day. There are also several petrochemical plants, a polyvinyl chloride factory, and many phosphate-processing plants. The Maghreb-EU pipeline has been operating since 1996. There are four plants assembling cars and small utility vehicles: Renault Moroc, Sopriam, Somaca, and Smeia. A number of cement factories are also in operation. The Safi industrial complex, opened in 1965, processes phosphates from Youssoufia, pyrrhotites from Kettara, and ammonia.
Ownership in the manufacturing sector is largely private, but the government owns the phosphate-chemical fertilizer industry and much of the sugar-milling capacity, through either partnership or joint financing. It is also a major participant in the car and truck assembly industry and in tire manufacturing.
Morocco is the largest silver market in Africa and third largest exporter of phosphate in the world after U.S. and China. Casablanca is Morocco's leading industrial centre with 39% of the country’s production units and 60% of industrial labor. Through investment Tangier is becoming a considerable centre of industry as well.
Morocco signed in 1996 an agreement of association with the European Union which came into effect in 2000. This agreement, which lies within the scope of the Barcelona Process (euro-Mediterranean partnership) started in 1995 and envisages the progressive implementation of a free trade area planned for 2012.
In 2005 FDI in Morocco increased from $1.07 billion to $2.9 billion from 2004 to 2005.