CPI FINANCIAL
by Robin Amlôt
“The banking sector has proven resilient to the global crisis and remains sound overall. We support Bank Al-Maghrib’s efforts to continue to strengthen banking regulation and supervision, including through gradual adherence to Basel III standards,” said International Monetary Fund (IMF) team leader Jean-François Dauphin following discussions in Morocco.
“In addition, continuing efforts to foster deeper financial access, especially in rural areas, and strengthen intermediation, would help widen access to credit, particularly for small and medium enterprises, and contribute to higher and more inclusive growth.”
Dauphin added, “Morocco’s sound economic fundamentals and overall strong record of policy implementation have contributed, over the years, to a solid macroeconomic performance…
“More recently, Morocco’s solid performance has been challenged by the deterioration of the economic situation in Europe, high oil and food prices and, in 2012, a lower than average agriculture production. GDP growth is expected to slow to about 3 per cent in 2012, although the non-agriculture growth is expected to remain robust at 4.5 per cent. The current account deficit is expected to exceed eight per cent of GDP, even though international reserves have stabilised at around four months of imports. The successful sovereign bond issuance in December in the amount of $1.5 billion — of which a third has a 30-year maturity — has confirmed market confidence. The fiscal deficit should decline to about six percent of GDP due in part to the adjustment in the prices of subsidized products in June. Inflation is projected to remain low at 1.3 per cent in 2012, despite these price increases. Unemployment is stable around nine per cent, and remains especially high among the youth.
“External pressures are expected to continue and an additional deterioration of the international environment cannot be excluded. In this context, the authorities’ program supported by the PLL, which builds on structural measures to increase competitiveness, potential growth and employment, fiscal consolidation, and prudent monetary and financial policies, remains appropriate. However, implementing the needed reforms has become increasingly urgent if Morocco is to preserve its performance in the face of a challenging external environment.
“Preserving fiscal sustainability remains a priority. The fiscal stance envisaged in the draft 2013 budget law is appropriate, but ensuring medium-term sustainability will hinge on the delivery of critical structural fiscal reforms which will also create the fiscal space for improved social protection and higher investment in human capital and infrastructure. In this regard, the reform of the subsidy system is crucial and urgent, as the current system is a drain on the budget and an ineffective tool to support the population in need. Similarly, a reform of the pension system is also urgently needed to ensure its viability and preserve medium-and long-term fiscal sustainability.
