Based in Paris, BNP Paribas' Economic Research Department is composed of economists and statisticians:
The Economic Research department’s mission is to cater to the economic research needs of the clients, business lines and functions of BNP Paribas. Our team of economists and statisticians covers a large number of advanced, developing and emerging countries, the real economy, financial markets and banking. As we foster the sharing of our research output with anyone who is interested in the economic situation or who needs insight into specific economic issues, this website presents our analysis, videos and podcasts.
+33(0)1 42 98 02 04 stephane.alby@bnpparibas.com
Despite rapid support measures, the economy will not escape a severe recession this year. With the abrupt halting of tourism activity, the drop-off in exports to Europe and the collapse of domestic demand in Q2, GDP will contract by about 6%. Although there are high hopes that a good agricultural harvest will fuel a rebound in 2021, the recovery of non-agricultural activities will take time. In contrast, Morocco’s macroeconomic stability does not seem to be threatened. But growing pressure on public finances leaves the authorities very little manoeuvring room.
According to the government, the Covid-19 crisis will push the budget deficit up to 11.4% of GDP this year, from the 4.7% initially expected. More importantly, medium-term forecasts do not predict a return of the deficit to below 5% of GDP before 2024. This is a worrying trend. Covering financing requirements will prove to be challenging. With the bulk of external financing having already materialized, the government will have to turn to the local debt market. However, conditions here are onerous, resulting in interest costs rising to a very high level (50% of government revenue in 2020). Another option would be to make use of monetary financing. The central bank already has an asset purchase programme in place (2.6% of GDP)
Although the pandemic is well contained from a health perspective, the Covid-19 crisis combined with the downturn in oil prices will have severe economic consequences. With no real fiscal leeway, the government has implemented a very modest economic stimulus plan, while massive capital outflows and the collapse of oil exports have fuelled the rapid erosion of foreign reserves, bringing the naira under pressure. The deterioration in public and external accounts despite support from donor funds hampers any prospects of a recovery. Just four years after the last recession, real GDP is expected to contract significantly again in 2020. Without an upturn in oil prices, the rebound will be mild in 2021.
The Moroccan economy will see significant consequences from the coronavirus pandemic. Tourism has been at a standstill since March and will remain so until May at the earliest. The automotive sector and remittances from the Moroccan diaspora will also be hit by the crisis in Europe. However, and provided that the situation improves in the second half of the year, Morocco should be able to avoid recession. Macroeconomic fundamentals are solid and the country will benefit from a substantial fall in oil imports. Moreover, the authorities have reacted swiftly to dampen the shock.
Tourism is the main transmission channel of the Covid-19 pandemic to the Moroccan economy. Activity has been at a standstill since March and will remain so until May, at least. The losses will be significant in a sector that contributes to more than 8% of GDP, which is the highest level in the region. On a more positive note, two-thirds of the tourist season comes from June onwards, which might coincide with the easing of restrictions on travel in some countries even if the recovery of the activity would be gradual. The slump in tourism activity will weigh on growth and external accounts. The sector accounts for 15% of current account receipts. However, external stability does not look under threat. Forex reserves are comfortable and external debt is moderate
The end of the CFA franc and its replacement with the eco scheduled for next June address the legitimate desire of WAEMU member countries to manage what is already their single currency. Governance of the currency regime will change as the French Treasury pulls out of WAEMU entities, although it will still serve as the lender of last resort. Though the euro peg will limit monetary policy’s independence, it is necessary to shore up the macroeconomic stability of WAEMU, which is still fragile.
With anaemic growth, strong pressure on hydrocarbon revenue and substantial twin deficits, the macroeconomic situation is worrying. For the time being, forex reserves remain at comfortable levels but the speed and scale of their contraction is a major source of vulnerability over the short to medium term. Meanwhile, although certain decisions suggest a change of tack in the government’s position after years of economic protectionism, this progress is still too hesitant given the challenges. It is also of limited effectiveness whilst the business climate has not yet stabilised.
