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Economy recovers as rain continues to fall.

The Moroccan economy took several small steps towards recovering from the negative effects of an extended drought, and many are estimating significant growth in 1994.

Energy shortages, however, still exist, and Morocco's electric utility took several steps to improve the situation. Several development-related loans were made, and the government announced plans to study a comprehensive health-insurance programme.

Thailand has announced plans to open an Embassy in Rabat as a result of increased investment interest.
MOROCCAN TOURIST ARRIVALS

 1993 1992 % change

European 1,108,494 1,008,599 +9.9%
Algerian 954,936 1,283,609 -25.6%
Other 222,011 233,290 -4.8%
Total 2,285,341 2,525,498 -9.5%


Thanks to continued good winter rains, Moroccan dams were at 36% of capacity by the end of January. This is nearly double the level recorded at the end of October 1993. Hydroelectric dams were at 33.8% of capacity in late January. Not all of Morocco is receiving heavy rains, however; the Middle Atlas, the Saiss Plains and parts of the north are anywhere from 5% to 20% below normal, according to Morocco's meteorological service. Although the improvement in stored water has allowed the National Office of Electricity (ONE) to ease restrictions on its industrial consumers (industrial plants now must shut down one day a week, as opposed to twice a week previously), Morocco continues efforts to improve its ability to produce and deliver electricity.

On 4 January, the ONE agreed to buy 300 megawatts (MW) a year from RED Electrica of Spain between 1996 and 1998, at a total cost of $280m. This power is to come in via a $77m undersea cable linking Morocco to the Spanish power grid. The cable is scheduled for completion in 1995. Since 1991, Morocco has imported annually between 150MW and 180MW, at a cost of approximately $60m per year, from Algeria's Sonelgas utility.

Meanwhile, it has been reported that the ONE is eight months in arrears in paying its fuel-oil suppliers - Mobil, Shell and Total - and that it owes them over 2bn dirhams ($222m).

The ONE has decided to import 400,000 tonnes of coal from South Africa with an option for an additional 400,000t. The purchase is to be financed by a $60m line of credit from, among others, the French banks BMCE Paris and Banque Nationale de Paris (BNP). In mid-January, the President of the Saudi-based Islamic Development Bank (IDB), Ahmed Mohammad Ali, presided over the opening in Rabat of the IDB's first regional office outside Saudi Arabia. The IDB announced that it has granted a $16m loan to Morocco's National Telecommunications Office (ONPT) to help finance the purchase and installation of 3,350 km of telephone lines.

Minister for Posts & Telecommunications Ahizoun announced that the PTT plans to increase the number of Moroccan telephone subscribers to 1.56m from the current 830,000. The PTT claims that the Moroccan phone system is the fastest growing in the world. The number of subscribers rose from 497,000 at the end of 1991 to 592,000 at the end of 1992, showing increases of 19% and 40% in the last two years.

On 10 January, the Kuwaiti Economic Development Fund (KEDF) agreed to lend $60m to the Moroccan government to help finance an irrigation project in the Haouz and Tassaout region of southern Morocco. The World Bank, meanwhile, announced a $34.7m loan to the government of Morocco to provide irrigation services for some 200,000 of the country's small-scale farmers. The European Union (EU) granted a $7m line of credit to Morocco's Banque Centrale Populaire (BCP) to help finance labour-intensive development projects in the north of Morocco, the Rif.

The EU is to advance up to 40% of the project capital interest free, while the

BCP is to provide 50% at interest rates of between 9% and 12%. The grant is part of a larger EU programme to combat cannabis production in the area by encouraging economic growth.

Meanwhile, the Thai government has announced that it is to open an Embassy in Rabat, its first in the Maghreb, in February 1995. The Thai Ambassador-Designate explains that Thailand is attracted by the access which Moroccan textile products have to the EU market.

Garments for Europe

Thai investors plan to manufacture garments in Morocco for export to the EU. The announcement that Thailand is to establish an Embassy in Morocco was followed by a visit to Rabat on 22 January by a Thai parliamentary delegation that included the First Vice-President of Parliament. The delegation discussed with Moroccan parliamentarians ways of enhancing bilateral co-operation in the commercial and economic fields.

The Minister of Public Health announced in early January that the government of Morocco is studying a plan for mandatory health insurance that would cover employees in the public and private sectors, their families and retirees. The Minister also announced plans to spend 52.4bn dirhams ($5.8bn) on improving health care in Morocco's rural areas, in part by finishing construction of five hospitals to serve those living outside Morocco's cities.

GDP growth

For purposes of its budget, the government is assuming that GDP will grow by 7% in 1994. But one Minister has stated that the economy could grow by as much as 10% if Morocco has a good harvest. A leading semiprivate Moroccan economic analysis group, the Centre Marocain de Conjoncture (CMC), predicts 8% real growth.

These estimates are based partly on the optimistic but not implausible assumption that agricultural production will increase by 35%.

The forecast is for a bumper cereal crop of 6.5m tonnes, compared to the disastrous 2.7m t crop of 1993. CMC also predicts an inflation rate of 6% for 1994, up from last year's 5% rate.

The merchandise trade deficit decreased slightly in 1993. Imports declined marginally, from MD62.8bn ($7.0bn) in 1992 to MD62.1bn ($6.9bn) in 1993, while exports also declined slightly, from MD34.16bn ($3.8bn) in 1992 to MD34bn ($3.78bn) in 1993, leaving a trade deficit of MD28.1bn ($3.12bn) in 1993, down marginally from 1992's shortfall of MD28.65bn ($3.18bn).

Imports slow down

The main reason for the narrowed deficit is the slowdown of imports brought on by slow growth of domestic demand during a period of zero GDP growth because of the bad harvest. Foreign export demand was also slack but was less so than domestic demand.

Although the value of imports stagnated, port traffic was up in volume terms, owing mainly to grain imports. For 1993, the volume of imports rose by 1.1%, while the volume of exports declined by 0.2%. Total harbour traffic rose by 0.5%, to 40.5m t.

New income tax rates were proposed in the government's 1994 budget.

Who pays income tax

As in most developing countries, income taxes are paid primarily by government employees and salaried workers in large companies who cannot easily hide their incomes.

One of the Moroccan business weeklies has begun publishing interest-rate information. Until then, no regular or consistent interest-rate series had been published, except for some retrospective rates in the central bank's annual report.

The representative rates for late January ranged from 10.5% for six-month deposits to 13.94% for short-term loans and to 14.0% for medium-term loans at the banks, while government bond auctions drew 11.5% for one-year and 11.0% for five-year instruments. Interest rates have been slowly declining. The ceiling on bank lending is set by the central bank as a mark-up of 2.5 percentage points over the taux de reference mensuel (TRM), or monthly reference rate. The TRM is defined as the previous month's weighted average of six- and 12-month deposit rates paid by banks. The TRM in 1993 ranged from 11.44% in December to 12.02% in February.
INCOME TAX RATE

Income % tax

MD0-MD18,000 0
MD18,001-MD24,000 14
MD24,001-MD36,000 22
MD36,001-MD60,000 36
MD60,001-MD90,000 44
MD90,001-MD120,000 46
MD120,001 and up 47


Tourist arrivals for the first nine months of 1993 tell an interesting story. The total number is down by 9.5%, but the figure reflects a 26% drop in Algerian visitors, offset by a 10% increase in European visitors. European tourism represents an important source of foreign exchange brought in to pay for hotels, restaurants, souvenirs etc.

The Algerian visitors traditionally consist of two groups. One group is border residents crossing into Morocco to convert small foreign-exchange allocations into goods (often from Europe and Japan) available in Moroccan markets. The other group is Algerians resident in Europe passing through Morocco on their way to spend their vacations in their home country.

Algerian dinar woes

The devaluation of the Algerian dinar and the general security situation have cut into both categories. Meanwhile, the Office de Change announced that as of the end of October 1993, foreign-currency receipts from tourism were down by 4.8%, compared with the same period in 1992. This result would be consistent with the overall fall-off in tourism arrivals of 9.5%, with the bulk of the decline represented by Algerians.
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Date:Apr 1, 1994
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