VZCZCXYZ0005
RR RUEHWEB

DE RUEHRB #0447/01 1541707
ZNR UUUUU ZZH
R 031707Z JUN 09
FM AMEMBASSY RABAT
TO RUEHC/SECSTATE WASHDC 0167
INFO RUCNMGH/MAGHREB COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS RABAT 000447 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD MO
SUBJECT: ECONOMIC GROWTH WEAKENS AS CRISIS' IMPACT HITS HOME 
 
REF: A. RABAT 171 
     ¶B. CASABLANCA 014 
     ¶C. RABAT 284 
     ¶D. 08 RABAT 893 
     ¶E. 08 RABAT 853 
     ¶F. 08 RABAT 254 
 
¶1. (U) Summary: While official GDP growth projections remain 
near 5 percent for 2009, thanks to this year's bumper 
agricultural harvest, the outlook for non-agricultural 
sectors appears increasingly somber as a result of the world 
economic downturn.  Growth outside agriculture was only 1.3 
percent in the first quarter, its lowest level since 2002. 
All sectors have been affected, from industry to services, 
construction, and tourism.  Adding to the gloom, the Caisse 
Nationale de Securite Social (CNSS) reported on June 1 that 
nearly 20,000 jobs were lost in April, bringing the total for 
the year in the formal economy to nearly 43,000.  The 
Moroccan government's Surveillance Committee continues to 
meet regularly and this week announced a series of new 
measures aimed at propping up declining remittance income. 
End Summary. 
 
¶2. (SBU) "The Moroccan exception" is no longer the watchword 
of most GOM officials as they assess the country's position 
in the face of the international economic downturn (Ref A). 
While the financial sector remains sheltered as a result of 
Morocco's continuing capital controls, leading analysts such 
as the Bank al-Maghrib's Karim El Aynaoui emphasize that as 
an open economy Morocco cannot avoid being impacted by 
broader macro-economic trends.   His department's most recent 
monthly economic bulletin details widespread slippage in 
non-agricultural segments of the economy and continuing 
pessimism among business leaders about the Moroccan economy's 
prospects in the short to mid-term.  In the Bank's most 
recent survey of business sentiment, executives reported a 
decline in orders and an inventory build-up, with all 
industrial sectors except agro-industry and the chemical 
industry reporting a decline in production.  All sectors also 
shed jobs, with the textile sector taking one of the largest 
hits.  The Moroccan textile association AMITH noted that its 
members cut 13,000 jobs in March, 11,000 directly as a result 
of the crisis (Ref B). 
 
¶3. (U) Other recent statistics tell a similar story of weaker 
economic activity.  At the end of March, electricity demand 
was down by 0.3 percent, as a result of a 2 percent decline 
in industrial demand (domestic demand was up 6.4 percent), a 
dramatic shift from the 8 percent annual increases in demand 
that have typified recent years.  Petroleum imports were also 
down 18 percent by volume for the first four months of 2009, 
although this news was somewhat more welcome as the declining 
demand eased the current account deficit.  Exports have also 
shown weakness, falling by 30.4 percent in the first quarter, 
with phosphates, which led last year's export growth, down by 
52 percent.   (Note: Mining production itself is down 84 
percent this year from last, largely as a result of the 
phosphate industry's difficulties.)  The export decline was 
also marked in advanced sectors like electronic and 
automotive parts, as well as in traditional export sectors 
like textiles.  Recently, however, AMITH and Minister of 
Finance Mezouar have been engaged in a war of words over a 
temporary rise in Morocco's textile exports in April. 
Industry experts dismiss the 41 percent year on year increase 
for the month as meaningless, noting that April 2008 was the 
worst month in the industry's history, and that exports 
remain down overall for the first four months of the year. 
 
¶4. (U) Tourism has also suffered.  Whereas tourist arrivals 
were up 4 percent over last year through the end of March, 
hotel stays declined nearly 7 percent, and tourist revenues 
declined by 21 percent to 9.4 billion MAD (1.2 billion USD). 
Remittances from Moroccans abroad, another key component of 
the balance of payments, also showed weakness, falling 14 
percent.  These two flows, together with investment income, 
have historically compensated for Morocco's structural trade 
deficit.  While foreign direct investment has remained 
relatively stronger than the other two factors, with an 
inflow of 8.7 billion MAD (1.1 billion USD) in the quarter, 
foreign reserves have slipped to the point where they now 
total only 5 months of imports.  In sum, as Minister of 
External Commerce Abdellatif Maazouz told an international 
conference in Fes on May 28, while Morocco has not been 
touched by the "financial crisis" per se, its balance of 
payments is channeling the broader economic downturn to 
Morocco (Ref C). 
 
¶5. (U) The implications of the slowdown on overall economic 
activity and government finances are also becoming evident. 
If this year's exceptional harvest will keep growth at or 
near 5 percent, despite a slump in non-agricultural growth to 
1.3 percent in the first quarter (the lowest level since 
2002), the government's relatively comfortable budgetary 
situation is also under pressure.  After two years of 
essentially balanced budgets, largely resulting from 
burgeoning tax receipts, this year promises to be more 
difficult.  The government's surplus at the end of the first 
quarter, a period when many payments are booked, declined by 
nearly half to 7.6 billion MAD (900 million USD).  The main 
culprit was a decline of 12.5 percent in tax revenue, 
including a 22 percent decline in income tax revenue and a 
17.5 percent fall in corporate tax receipts.  Press reports 
indicate that tax chief Noureddine Bensouda recently convoked 
his team and ordered them to tighten the screws to increase 
revenues, expanding the number of audits and checking for 
irregularities. 
 
¶6. (U) One area where the downturn's broader impact has not 
fully registered is that of employment.  If recent CNSS 
figures show a loss of 43,000 positions in the formal sector, 
the number is not yet sufficient to show up in the country's 
overall unemployment rate, which remains at 9.6 percent of 
the work force.  The more significant urban rate stands at 
14.1 percent, actually down from its level last year of 14.7 
percent.  (Rural unemployment recently rose to 4.7 percent.) 
 
¶7. (SBU) The government continues to monitor the situation 
closely via its surveillance committee, and this week 
unveiled several new measures aimed at shoring up vulnerable 
segments of the economy.  These include widening the 
availability of the program which provides short term 
assistance to exporters to help them cover part of their 
social security expenses.  Concerned about the decline in MRE 
transfers, the government also removed Western Union's 
monopoly and lowered the fees on money transfers. 
 
¶8. (SBU) Comment: If senior government officials remain 
reluctant to concede that Morocco is now caught up in the 
economic downturn, mid-level officials like Treasury Director 
Zouhair Chorfi have been less reticent.  Their warnings about 
future vulnerability are well timed, because while this 
year's harvest has cushioned a good bit of the downturn, the 
vagaries of climate make it uncertain whether this will be 
repeated next year.  Were Morocco to return to an average or 
below-average harvest, the combination of that with the 
current anemic level of non-agricultural growth might well 
tip the economy into recession.  End Comment. 
 
 
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Jackson