Charts of the Week


THE TOURISM SLUMP, A THREAT FOR THE ECONOMY Published on 8 Apr 2020 by Stéphane ALBY

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 fall in global oil prices should also help to keep current account deficit below 5% of GDP. Lastly, Morocco could draw on the IMF’s Precautionary and Liquidity Line if necessary.

Following the example of the ECB for the significant institutions[1], the Bank of Italy has decided to recommend to banks under its direct supervision (the less significant institutions) not to distribute or commit distributing dividends at least until 1 October 2020[2]. Moreover, share buy-backs will have to be restricted and less significant institutions in Italy will have to adopt "prudent and farsighted" variable-remuneration policies.

The five largest Italian banking groups, which account for almost half of the total assets of the domestic banking system, are thus likely to mobilize (in addition to the benefits that were not intended to be distributed) EUR 4.8 billion of additional common equity Tier 1 in 2019[3], representing 4.1% of its current outstanding amount (EUR 116.9 billion). These supplementary reserves will absorb part of the increase in the cost of risk in 2020 and will limit the decrease in regulatory capital, which has increased by 61% since 2008.


[1] ECB, ECB asks banks not to pay dividends until at least October 2020, 27 March 2020

[2] Bank of Italy, Recommendation of the Bank of Italy on the dividend distribution policies of less significant Italian banks during the Covid-19 pandemic, 27 March 2020

[3] Estimation based on pay-out ratio proposed by banks or observed in the most recent years.


The PMI indices published this week give an early insight into the scale of the economic shock from Covid-19. The composite indices for Japan (35.8), Germany (37.2), France (30.2), the UK (37.1) and the US (40.5) all slumped in March. The euro zone composite PMI was the lowest ever recorded at 31.4. The deterioration was particularly marked for the sub-indices relating to employment and orders for goods and services.

Figures for April, whilst remaining at historically low levels, are expected to show increasing divergence between the regions. In East Asia, internal demand should start to pick up, as activity starts to normalise in China. Conversely, the epidemic is spreading more rapidly in the US, India and Africa; meanwhile, many European countries remain in lock-down.

On the Same Theme

Morrocan exports : profile improves thanks to the boom in the automotive sector 2/13/2019
Morocco’s goods exports increased by more than 10% for a second year in a row in 2018, thanks to the good dynamics of phosphates exports and, above all, thanks to the rapid growth in the automotive industry. Since the launch of Renault’s factory in Tangier in 2012, exports of cars have doubled. They are now the largest source of exports and outlook is promising since several projects are in the pipe. The move to higher-value added export products improves the resiliency of the Moroccan economy to external shocks. However, spill-over effects remain limited notably due to a shortage of highly skilled labour force. Expected at 3% in 2019, the economic growth will be insufficient to reduce unemployment, especially for young people living in urban areas.
Morocco: greater exchange rate flexibility in sight 6/8/2017
Morocco will move toward greater exchange rate flexibility soon. The process will be gradual and tightly controlled by the central bank, and the economy is well prepared to face such evolution.
Morocco: seeking a second wind 3/30/2017
Morocco’s economy retains several characteristics that provide a solid basis for the future. The macroeconomic environment is solid, infrastructures are good and the banking system is sound and sophisticated. The Kingdom is also capitalizing on its potential as a manufacturing hub. The automotive industry is now the largest source of exports, and several development projects are in the pipe. But the modest economic growth since 2013 is a reminder of structural obstacles yet to overcome.

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