VZCZCXYZ0000
RR RUEHWEB

DE RUEHCL #0850/01 2021436
ZNR UUUUU ZZH
R 211436Z JUL 06
FM AMCONSUL CASABLANCA
TO RUEHC/SECSTATE WASHDC 7008
INFO RUEHRB/AMEMBASSY RABAT 7651
RUEHAS/AMEMBASSY ALGIERS 2819
RUEHTU/AMEMBASSY TUNIS 1944
RUEHFR/AMEMBASSY PARIS 0480
RUEHMD/AMEMBASSY MADRID 3655

UNCLAS CASABLANCA 000850 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR NEA/PI AND NEA/MAG 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EIND ELAB ETRD EAGR MO
SUBJECT: MOROCCO MACROECONOMIC UPDATE JUNE 2006 
 
 
¶1.  Summary: The Centre Marocain de Conjoncture (CMC), an 
independent Moroccan research center, forecasts a 7.1 percent growth 
rate for the Moroccan economy in 2006, up significantly from 
Government of Morocco (GOM) forecasts of 5.4 percent earlier this 
year.  The increase is attributed to an especially good year for 
agriculture, with cereal harvests registering record numbers. 
Tourism and remittances receipts performed strongly in the first 
part of 2006, continuing to compensate for a weakening balance of 
trade as exports receipts failed to keep pace with increasing 
imports driven by rising fuel prices.  In addition, Foreign Direct 
Investment (FDI) receipts registered a sharp reduction in the first 
four months of 2006 as compared to previous years, largely 
attributed to the GOM's slow-down in privatizations. Meanwhile, 
unemployment fell below 10 percent for the first time in 35 years, 
although the figures remain controversial among labor and business 
leaders.  End Summary. 
 
----------------------------------------- 
Strong Agriculture-Driven Growth For 2006 
----------------------------------------- 
 
¶2.  CMC forecasts a 7.1 percent growth rate for Morocco in 2006, up 
substantially from the GOM's own forecasts earlier this year of 5.4 
percent.  CMC attributed increased 2006 economic growth to an 
especially good agriculture season with cereal harvests registering 
record numbers.  Non-agricultural GDP remained stable at 4 percent 
for first quarter 2006, with strong performance in the energy, 
construction and public works sectors. The disparity between 
agriculture and non-agriculture growth rates suggests continued 
economic dependence on agriculture despite recent GOM efforts to 
promote diversification.  As such, if 7.1 percent growth in 2006 is 
indeed realized it will be an impressive increase from 1.8 percent 
growth registered in 2005 (a drought year) and represent the highest 
Moroccan GDP growth rate in eight years. 
 
------------------------------------- 
Morocco Stays Attractive to Tourists 
------------------------------------- 
 
¶3.  Tourism receipts increased 18.2 percent through the end of April 
2006, to reach US $1.15 billion, while hotels registered an 18 
percent increase in overnight stays, 9 percent higher than over the 
same period in 2006.  The increase in overnight stays benefited all 
of Morocco's principal tourist destinations with Meknes (60 
percent), Essaouria (46 percent) and Oujda (27 percent) registering 
the largest increases.  Hotel occupancy rates have also increased to 
an average of 60 percent in the first four months of 2006 compared 
to 52 percent over the same period in 2005.  Among foreign 
nationals, France continues to lead in total number of tourists; 
however the United Kingdom witnessed the largest increase with 45 
percent more tourists in the first four months of 2006 compared to 
¶2005.  Morocco's total tourism receipts are 48 percent higher than 
in the first quarter of 2006 compared to the average received during 
same period over the past five years. 
 
------------------------ 
Remittances Keep Coming 
------------------------ 
 
¶4.  Remittances from Moroccans living abroad increased to more than 
US $1.6 billion at the end of April 2006, up 13.8 percent from the 
same period in 2005 and an increase of 28.8 percent over the average 
received during the past five years.  (Note: Between 2000 and 2004, 
remittances receipts averaged US $3.8 billion, equivalent to almost 
10 percent of GDP.)  Along with tourism receipts, remittances have 
traditionally been of critical importance in compensating for 
Morocco's trade deficit and maintaining foreign exchange reserves. 
 
--------------------------------------------- -- 
Foreign Direct Investment and Foreign Reserves 
--------------------------------------------- -- 
 
¶5.  Foreign Direct Investment (FDI) decreased 58.9 percent in the 
first four months of 2006 compared to a year earlier and 49.9 
percent lower than the average received during the same period 
between 2001 and 2005.  The drop in FDI can be mostly attributed to 
a reduction in state-owned privatization receipts.  By 2005, 70 
entities (44 companies and 26 hotels) had been either totally or 
partially privatized.  The GOM has announced plans to resume 
privatization of several existing state-owned entities before the 
end of 2006.  FDI receipts averaged US $2 billion between 2000 and 
¶2004.  By April 2006, foreign reserves increased 4.2 percent, or the 
equivalent of 11.3 months of imports, compared to the end of April 
¶2005. 
 
-------- 
Imports 
-------- 
 
¶6.  Morocco's 2006 imports increased 10.1 percent by the end of 
April over the same time period in 2005.  GOM officials continue to 
attribute the increase to a corresponding 10.1 percent increase in 
fuel imports which represented 89.2 percent of the total increase in 
imports.  Among other significant increases, capital equipment rose 
11.1 percent and semi-finished goods increased 7.9 percent. 
 
------- 
Exports 
------- 
¶7.  For the period of January to April 2006, total exports increased 
8.7 percent compared to 2005 and surpassed US $4 billion. 
Phosphates and derivative products led this growth with an increase 
of 37.4 percent.  Exports excluding phosphate products increased 3.8 
percent.  Several product categories registered increases, including 
consumer products (31.2 percent), semi-finished goods (30 percent), 
finished goods (9 percent) and raw materials (13.7 percent). However 
exports were still outpaced by increased imports, resulting in a net 
negative balance of trade in goods. 
 
---------------------- 
Unemployment Falling? 
---------------------- 
 
¶8.  Official GOM figures released by the Moroccan High Planning 
Commission (HPC) register an unexpected drop in the unemployment 
rate.  HCP figures for the first four months of 2006 showed an 
unemployment rate of 9.8 percent, compared to 11.3 percent for the 
same period in 2005, the first time unemployment has fallen below 10 
percent in almost 35 years.  HPC figures also claim that urban 
unemployment fell to 15.4 percent from 19.2 percent.  Local labor 
leaders and business contacts expressed strong skepticism of these 
figures however, and told Emboffs that actual unemployment in 
Morocco is significantly higher. 
 
¶9.  The HCP also released first quarter 2006 figures showing a 2.4 
percent increase in Morocco's cost of living compared to the same 
period in 2005.  The increase was felt most acutely in Agadir (3.1 
percent), Fez (3.1 percent) and Oujda (2.8 percent), and less so in 
Tetouane (1.8 percent) and Rabat (1.8 percent). 
 
-------------------------- 
Devaluation Still Debated 
-------------------------- 
 
¶10.  Pressure continues to build for the GOM to devalue (or even 
float) the Moroccan dirham, which many financial experts argue is 
grossly overvalued.  Proponents of devaluation (principally 
exporters and international financial institutions) argue that 
Morocco's weakening balance of trade and deteriorating competitive 
performance in some key sectors (i.e. textiles) demands rapid GOM 
intervention. Opponents respond that despite a weakening balance of 
trade, the current account remains in surplus (thanks to tourism and 
remittance receipts).  Furthermore, devaluation could significantly 
raise the cost of imports (in particular fuel) adversely affecting 
GOM debt and raising inflationary concerns. The GOM continues to 
debate the issue, and a flurry of articles have appeared in the 
press recently, however GOM and private sector contacts tell Emboffs 
that a decision to devalue or float the Moroccan dirham is not 
expected anytime soon. 
 
¶11.  The following is a brief summary of significant economic 
statistics for Morocco covering the past five years: 
 
GDP Growth (percent) 
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