VZCZCXYZ0001
RR RUEHWEB

DE RUEHCL #0236/01 0621146
ZNR UUUUU ZZH
R 031146Z MAR 06
FM AMCONSUL CASABLANCA
TO RUEHC/SECSTATE WASHDC 6323
INFO RUEHRB/AMEMBASSY RABAT 7473

UNCLAS CASABLANCA 000236 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR NEA/PI AND NEA/MAG 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EIND ELAB ETRD MO
SUBJECT: MOROCCO MACROECONOMIC UPDATE 
 
¶1.  (U) SUMMARY: Official Government of Morocco (GOM) 
figures confirm positive yet low economic growth in 
¶2005.  GOM officials cite high energy prices, an 
adverse agricultural season and unfavorable 
developments in the textiles sector as contributing to 
restrained economic growth.  Unexpectedly, GOM 
officials anticipate posting a current account surplus 
in 2005 (earlier figures forecast the first current 
account deficit in four years). However, the surplus 
will likely be small, reflecting Morocco's worsening 
trade deficit.  Non-trade elements of the services and 
private transfer accounts of the Balance of Payments 
(i.e. tourism and remittances), continue to save the 
day, compensating for Morocco's visible trade balance. 
Imports increased significantly in 2005 driven by high 
oil prices while exports failed to keep pace, despite 
strong performance in the phosphates sector.  Foreign 
Direct Investment (FDI) increased 70.8% over 2004 to 
reach almost US $3 billion in 2005, driven by increased 
investment in telecommunications and tourism. 
Inflation remained steady at 1%, despite higher oil 
prices triggering rising consumer prices in the 
transport sector.  Lastly, unemployment continues to 
rise, notwithstanding the creation of a quarter million 
new jobs in 2005.  END SUMMARY. 
 
Positive Growth Rate, But Still Sluggish 
 
¶2.  (U) GOM Minister of Finance and Privatization (MOF) 
Fathallah Oualalou announced 1.8% economic growth for 
2005 and forecast 5.4% growth for 2006.  While 
attributing subdued 2005 economic growth to adverse 
agricultural conditions, Oualalou credited strong 
performance in non-agricultural sectors (which 
registered 4.4% growth) with ensuring overall positive 
growth for the year.  However, the final figure is 
still well under the GOM's target of 3% growth for 
¶2005.  Sectors that performed particularly well include 
mining, petroleum refining, and tourism. 
 
Public Finance 
 
¶3.  (SBU) Improvement in overall tax receipts 
contributed to increased government revenue, which 
registered US $14 billion in 2005, an increase of 12%. 
Expenses increased nearly US $2 billion (20% over 
2004).  Domestic debt increased significantly, reaching 
US $29 billion or 56.1% of GDP, up from 50.5% in 2004. 
Foreign debt fell to US 12.4 billion, or 25% of GDP 
from US $14 billion, 26% of GDP, in 2004, consistent 
with GOM strategy to transfer expensive foreign debt to 
relatively cheaper domestic alternatives.  Some local 
observers, however, are alarmed at the increasingly 
level of domestic debt arguing it cannot be 
rationalized by foreign to domestic debt transfers. 
Total debt stands at over US $40 billion, representing 
over 75% of GDP.  The government budget deficit 
registered 4.2% of GDP in 2005(or 5.7% excluding 
privatization receipts).  Oualalou credited increases 
in revenue to strong performance of direct tax 
receipts, including corporate receipts (up 22% from 
2004) and income tax receipts which increased 16%. 
Total revenue from direct taxes increased 18.8% in 
2005, a figure Oualalou describes as "remarkable". 
 
Current Account Surplus (Just Barely) 
 
¶4.  (U)  Morocco will register a current account 
surplus in 2005, albeit a small one, continuing a trend 
of four consecutive years of current account 
surpluses(2004, $1.1 billion, 2003, $1.6 billion, 2002, 
$638 million, 2001, $3.8 billion).  Earlier GOM figures 
suggested Morocco might register a current account 
deficit for 2005 and final figures confirming the 
surplus are still pending.  Preliminary 2005 BOP 
figures still confirm a worsening of Morocco's Balance 
of Trade (BOT) with tourism and remittances continuing 
to compensate for Morocco's negative balance of trade 
in goods. 
 
Tourism Performs Well 
 
¶5.  (U) Tourism receipts increased 18% in 2005, 
totaling US $4.7 billion and representing a 40.9% 
increase over the average tourism receipts received 
between 2000 and 2004.  In December 2005 alone, tourism 
receipts registered 22% higher than December 2004. 
Morocco received more than 5.8 million tourists in 
2005, of which almost 2.8 million were Moroccan ex- 
patriats.  Among foreign nationals, France led in total 
number of tourists (1.3 million visitors representing a 
15% increase from 2004), while Germany had the highest 
percentage increase from the previous year (29% in 
2005, totaling 1.9 thousand visitors).  GOM 2005 
figures indicate a 16% increase in hotel stays and an 
improved average hotel occupancy rate of 47% compared 
to 43% in 2004. 
 
Remittances Stronger Still 
 
¶6.  (U) Remittances from Moroccans living abroad 
totaled to more than US $4.5 billion in 2005, an 
increase of 8.2% compared to 2004 and an increase of 
23.8% over the average received during the past five 
years.  (Between 2000 and 2004, remittances receipts 
average US $3.8 billion, equivalent to almost 10% of 
GDP.)  Along with tourism receipts, remittances have 
traditionally been critical to compensating for 
Morocco's trade deficit and maintaining foreign 
exchange reserves. 
 
Foreign Direct Investment and Foreign Reserves 
 
¶7.  (U) Foreign Direct Investment (FDI) increased 70.8% 
over 2004 to reach almost US $3 billion in 2005, led by 
investments in telecommunications and tourism, the 
latter driven by Gulf Arab investors such as the United 
Arab Emirates (UAE).  Comparatively, FDI receipts 
averaged US $2 billion between 2000 and 2004.  FDI 
registered its highest performance since the record 
setting figures of 2001.  Foreign reserves increased 
10.3% to stand at nearly US $17 billion, equivalent to 
11.3 months of imports.  In 2004, foreign reserves 
stood at $15.2 billion equivalent to almost 12 months 
of imports. 
Exports and Imports 
 
¶8.  (U) Morocco's 2005 imports increased 13% over 2004 
to reach over US $20 billion.  GOM officials attribute 
much of the increase to a 64.7% increase in fuel 
imports.  Import figures excluding fuel registered a 
7.7% increase, and 2005 fuel imports are 32.8% higher 
than the average over the past five years. Among other 
increases, finished goods rose +4.9%, semi-finished 
goods +6.3% and foodstuffs +13.3%.  Significant 
increases in importation of rental cars (+28.8%) and 
industrial vehicles (+33.3%) were also recorded. 
 
¶9.  (U) Total exports increased 5.5% to reach US $10.5 
billion led by increased export of phosphates and 
derivative products (+16.1%), while exports excluding 
phosphate figures increased 3.5%.  With the notable 
exceptions of consumer products (-4.7%) and capital 
equipment (-12%), most product categories registered 
increases, including foodstuffs (+16.3%), energy 
(+19.8%), and raw materials (+20%). However exports 
were still outpaced by increased imports, resulting in 
a net negative balance of trade in goods.  The cover 
rate of exports to imports declined from 55.7% to 52% 
in 2005. 
 
Oil and Inflation 
 
¶10.  (U) Escalating oil prices continued to hamper 
Morocco's macroeconomic performance throughout 2005, 
with oil imports reaching US $2.7 billion, a 64.7% 
increase from 2004.  Morocco depends on energy imports 
and subsidizes retail fuel prices through a mechanism 
known as the "Compensation Fund".  GOM initially 
assumed an average price of $35 a barrel for the 2005 
budget.  The unyielding ascent of international prices 
put the country's Compensation Fund in severe deficit 
and pressured the GOM to raise fuel prices three times 
in 2005. 
 
¶11.  (U) GOM recently negotiated a payment schedule 
with the Association of Oil Distributors to close the 
deficit of the Compensation Fund.  Oil industry 
contacts describe the agreement as "acceptable"; 
however, they also commented that the GOM 2006 budget 
assumption of US $60 a barrel, while "more realistic" 
than 2005, is still "a bit optimistic".  With oil 
prices continuing to rise, Oualalou recently announced 
GOM's intention to index fuel prices to international 
markets, but details on the implementation are still 
pending. 
 
¶12.  (U) GOM's cost of living index grew 1% in 2005, 
down from a 1.5% rise in 2004. Consumer inflation has 
remained below 2% for six of the last eight years. 
However, rising fuel prices have been felt acutely in 
the transport sector, and continue to raise 
inflationary concerns. 
 
Unemployment Increasing 
 
¶13.  (U) GOM fourth quarter 2005 unemployment figures 
reached 11.5%, up from 10.4% during the same period in 
¶2004.  GOM figures estimate 1.2 million unemployed 
among the active population, up from 1.1 million in 
2004 (a 15% increase).  Urban unemployment increased to 
19.4% from 18.0% while rural unemployment increased to 
3.6% from 2.5%.  Groups most affected by rising 
unemployment include urban females (up to 25.8% from 
23%) and rural men (up to 3.6% from 2.5%).  13.8% of 
urban adults aged 35 to 44 are unemployed (up from 
9.6%) along with 5.7% of the active rural population 
aged 15 to 24 (up from 3.9%).  GOM announced creation 
of 258,000 new jobs in 2005, although the number was 
not enough to absorb new entrants. 
 
¶14.  (U) The following is a brief summary of 
significant economic statistics for Morocco covering 
the past five years: 
 
GDP Growth (%) 
2000 1.0 
2001 6.3 
2002 3.2 
2003 5.1 
2004 4.5 
2005 1.8 
 
GDP per Capita (US$) 
2000 1200.6 
2001 1219.8 
2002 1273.5 
2003 1517.8 
2004 1710.0 
2005 1708.0 (estimated) 
 
Exports (m US$) 
2000  6952.0 
2001  7136.8 
2002  7839.0 
2003  8771.0 
2004  9736.0 
2005 10444.4 
 
Imports (m US$) 
2000  11513.3 
2001  11034.1 
2002  11833.3 
2003  14559.9 
2004  17617.0 
2005 20089.9 
 
Private Consumption (US$) 
2000 785.5 
2001 771.3 
2002 799.3 
2003 935.5 
2004 1070.0 
2005 NA 
 
GREENE