VZCZCXRO3556
RR RUEHTRO
DE RUEHRB #0171/01 0571554
ZNR UUUUU ZZH
R 261554Z FEB 09
FM AMEMBASSY RABAT
TO RUEHC/SECSTATE WASHDC 9737
INFO RUCNMGH/MAGHREB COLLECTIVE
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDO/USDOC WASHDC

UNCLAS SECTION 01 OF 02 RABAT 000171 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/MAG AND EEB/TPP/BTA (EGAN) 
STATE PASS USTR (BURKHEAD) 
USDOC FOR ITA/MAC/ONE (MASON), ADVOCACY CTR (TABINE), AND 
CLDP 
(TEJTEL AND ELKSTOUF) 
CAIRO FOR FINANCIAL ATTACHE (SEVERENS) 
LONDON AND PARIS FOR NEA WATCHER 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EAGR ETRD MO
SUBJECT: "MANAGING GROWTH" OR "CONFRONTING CRISIS:" MOROCCO 
DEBATES ITS POSITION 
 
REF: RABAT 119 
 
RABAT 00000171  001.2 OF 002 
 
 
Sensitive but Unclassified - Not for Internet Distribution. 
 
¶1. (SBU) Summary: Dueling events on February 24 highlighted 
contrasting views of how and when Morocco will be impacted by 
the international financial crisis.  In Rabat, Prime Minister 
Abbas El Fassi presided over the signature of conventions 
that implement the government's USD 150 million in initial 
"emergency measures" to address the downturn's emerging 
impact on the textile, leather, and automotive industries. 
Finance Minister Mezouar conceded that the measures are not 
"spectacular," but argued that they do not need to be: "this 
is not a stimulus policy," he stressed, but one of "support 
for growth."  At the same time in Casablanca, economists 
debated how Morocco should respond to the crisis at the 
annual conference of the country's leading economic think 
tank, with Tourism Minister Boussaid rebutting criticism that 
the government has been slow to respond by stressing that 
growth will exceed six percent this year and that there is 
"no need to panic."  End Summary. 
 
¶2. (U) The 1.3 billion MAD (150 million USD) in support for 
the three most impacted sectors of the economy-- textiles, 
leather, and auto parts-- follows the outline that Mezouar 
provided earlier this month (reftel).  800 million MAD is 
allocated to reimbursing companies for part of their social 
security expenditures.  Companies that maintain 95 percent of 
their workforce and do not lower salaries are eligible to 
have 20 percent of such expenditures reimbursed by the 
government.  In addition, to ensure that companies retain 
access to sufficient liquidity to continue to operate, the 
government reinforced its system of bank guarantees, leading 
Moroccan banks to agree to maintain the lines of credit that 
they opened to the private sector in 2008, and to grant a 
one-year moratorium to companies that request it.  Finally, 
companies are eligible to draw on the 500 million MAD that 
the government has allocated to its ambitious two-year export 
promotion strategy (septel). 
 
¶3. (U) Finance Minister Mezouar was careful not to oversell 
the measures in his public comments at the convention 
signings.  He argued that they were in line with the 
government's attempts to craft a pragmatic, public-private 
response to a crisis whose implications for Morocco are only 
now becoming evident.  "They do not constitute a stimulus 
program," he stressed, but a "support for growth."  He added 
that his recently instituted strategy committee (reftel) will 
continue to meet to work on other measures for other sectors. 
  Measures under consideration include reducing port charges 
and permitting companies that imported material temporarily 
for re-export, but now find that their foreign markets have 
dried up, to sell up to 15 percent of such products on the 
domestic market. 
 
¶4. (U) At the same time that the conventions were signed, the 
"Centre Marocain de Conjoncture" (CMC), the country's leading 
economic think tank, organized its annual economic conference 
in Casablanca on the impact of the crisis and appropriate 
policy responses to it.  While CMC president Habib El Malki 
pressed for a "national growth pact," arguing that government 
efforts to diversify and modernize the economy have been too 
haphazard and uncoordinated, many speakers emphasized instead 
the "Moroccan exception" and the strong position from which 
Morocco confronts the crisis.  Chief among them was Tourism 
Minister Mohammed Boussaid, the designated government 
representative at the event, who predicted that growth this 
year will exceed 6 percent, and that "we mustn't react to 
things that aren't there."  There is "no need for panic," he 
argued, "we must be flexible and react as the crisis 
develops." 
 
¶5. (U) The Central Bank's Director of Studies, Karim El 
Aynaoui, echoed this positive message, stressing that 
positive statements by Bank Governor Abdellatif Jouahri, 
among others, stem not from "myopia" but from economic 
realities.  He pointed out that the crisis hit after the 
longest period of growth in Moroccan history, and that while 
industry will have to adjust prices in the face of falling 
demand, Morocco has unique strengths in the face of what is 
 
RABAT 00000171  002.2 OF 002 
 
 
primarily a "debt crisis."  The country largely finances 
itself, its budget has been balanced over the last two years, 
and its overall debt level has fallen to 48 percent of GDP. 
The country's financial sector is in a very strong position, 
and continues to provide financing to the real economy, with 
credit growing by 22 percent over the past year.  Aynaoui 
contrasted the health of Morocco's banking sector, with only 
4 percent of private bank lending in distress, to the frozen 
credit markets in the U.S. and Europe, arguing that "we don't 
have a credit cruch here," and a rescue plan is unnecessary. 
He conceded that the slowdown in Europe will affect Morocco, 
estimating that each drop of 1 percent in European GDP lowers 
Moroccan GDP by 0.4 percent, but noted the silver lining in 
falling commodity prices.  Both imports and exports will fall 
by up to 18 percent, he predicted, but the result will be an 
easing of the balance of payments, given that imports start 
from a larger base.  He noted that Morocco already recouped 
in January the decline it experienced in foreign exchange 
reserves last year, with reserves rising at the end of 
January to 187 billion MAD. 
 
¶6. (U) Other speakers were more nuanced in their appraisal of 
the situation.  Hamad Kassel, of Morocco's leading business 
organization, CGEM, noted that key sectors of the Moroccan 
economy have been impacted, showing that "we are not immune." 
 Investors are shelving projects, small companies in 
particular face a "crisis" in financing, and export-oriented 
economies enter the crisis in a weak position, given their 
lack of competitiveness and pre-existing problems.  He echoed 
Mezouar's appeal for public-private coordination, and urged 
that the government take advantage of the crisis to improve 
Morocco's business environment, noting recent slippage on 
many indices.  A recent survey by CMC confirmed Kassel's 
assessment of the crisis's impact, with nearly 80 percent of 
respondents already noting that they have "felt" the crisis, 
primarily through a decline in exports (32 percent), 
reduction in orders (61 percent) and impact on cash flow (67 
percent).  Surprisingly, but buttressing Aynaoui's optimistic 
assessment of the banking sector, only 10 percent reported a 
change in the attitude of their banks.  Most significantly, 
98 percent expect the crisis to expand and impact the economy. 
 
¶7. (U) How extensive that impact will be in Morocco remains 
an open question.  Analysts do not all share the government's 
high growth projections (in addition to the government's 6 
percent, the High Planning Commission (HPC) has predicted 6.7 
percent), but even the CMC's "worst-case" scenario forsees 
the economy growing at a 4.8 percent rate this year and 3.4 
percent in 2010.  The center's "more likely" base case, which 
anticipates a 1.7 point reduction in GDP growth (as opposed 
to the "worst-case's" 2.7 points) forsees growth of 5.2 
percent in 2009 and 4 percent in 2010. 
 
¶8. (U) Comment: This year's promising agricultural outlook 
has sparked increased optimism among government and private 
observers of the Moroccan economic scene.  If in the past 
sustained non-agricultural growth cushioned downturns in 
agricultural production, this year the shoe is on the other 
foot and Morocco is relying on an exceptional harvest to 
balance out difficulties elsewhere.  But with the larger 
crisis impact emerging in 2010, much will depend on that 
year's agricultural output: any recurrence of Morocco's 
recent droughts would greatly compound Morocco's 
difficulties.  End comment. 
 
 
***************************************** 
Visit Embassy Rabat's Classified Website; 
http://www.state.sgov.gov/p/nea/rabat 
***************************************** 
 
Jackson