Press Release No. 09/407

Press Release: Statement of an IMF Mission on the 2009 Article IV Consultation with Morocco

November 13, 2009

An International Monetary Fund (IMF) mission led by Mark Lewis visited Rabat from November 2-13, 2009, for the 2009 Article IV consultation with Morocco.

At the conclusion of the visit, the mission issued the following statement:

"In the context of the 2009 Article IV consultation discussions, the mission reviewed recent economic developments and the authorities’ strategy for mitigating the impact of the global crisis on Morocco, and discussed policies to boost economic growth, income, and employment. The mission met with government members, the Governor of the Central Bank, senior government officials, as well as representatives from the private sector and labor unions.

“Despite the world economic slowdown, Morocco’s economic performance has remained solid. Real GDP growth was 5.6 percent in 2008, and is expected to be around 5 percent in 2009, sustained by strong domestic demand and exceptional agricultural production. Consumer price inflation will drop to less than 2 percent in 2009, reflecting, among other factors, the decline in world commodities price. The current account deficit is expected to improve, assuming that the recent signs of a rebound continue in the last part of the year.

“Fiscal policy will appropriately loosen in 2009 and 2010, reflecting in good part the authorities’ counter-cyclical measures. Over the medium term, fiscal policy should aim to gradually bring the budget deficit below 3 percent of GDP, without jeopardizing the economic rebound. Important reforms in the public finance area are ongoing, including tax reforms, and efforts to gradually replace the current system of subsidies by targeted measures to assist the low-income segments of the population.

“The central bank has responded appropriately to the evolving economic and financial conditions through its interest rate policy and liquidity management tools. The mission notes that the central bank has the necessary tools, resources, and analytical framework in place should monetary policy evolve to an inflation targeting framework.

“The banking sector remains solid, and has largely been untouched by developments in international financial markets. Given the rapid credit growth in recent years, the Central Bank continues to pay close attention to credit quality.

“Strong and sustained economic growth in Morocco will depend on reforms aimed at increasing the productivity and competitiveness of the economy, and boosting Morocco’s ability to compete on external markets. To these ends, the authorities are undertaking a wide range of reforms, including in the sectors of justice, agriculture, energy, and education. Success in these efforts will raise investment and output, and help address key social challenges, including youth unemployment."