With the rapid spread of the new Coronavirus in Morocco who state of health emergency has just been extended until the 20th of May, the IMF forecasts a 3.7% fall in the Moroccan economy.
Confinement measures imposed across the globe will cause “the worst economic consequences since the Great Depression,” the IMF warned. And Morocco won’t be an exception. With the rapid spread of the new Coronavirus in the Kingdom, drastic confinement measures have led to the shutdown of a large part of the economy. Morocco, whose state of health emergency has just been extended until the 20th of May will see sharp declining growth rate and a widening trade deficit.
Morocco has active the IMF’s Precautionary and Liquidity Line (PLL)
According to the latest report of the International Monetary Fund (IMF) on the outlook for the global economy, the Moroccan economy is expected to shrink by about 3.7% in 2020. However, this forecast is based on an unsafe assumption: the containment measures must be completely lifted before the end of June and the economic recovery must take place under the best possible conditions.
Burning the candle at both ends, Morocco has activated the IMF’s Precautionary and Liquidity Line (PLL) of 3 billion dollars to infuse fresh cash liquidity into the economy, but also to support the many employees who are partially unemployed or have lost their jobs. This unprecedented credit will be repayable over five years, with a three-year grace period, according to a press release from Bank Al-Maghrib, Morocco’s central bank. The IMF has also specified that part of this sum will be allocated to finance the balance of payments without impacting Morocco’s public debt. This is therefore a first in financial transactions between Morocco and the IMF.
Among the sectors most affected by the crisis are tourism and the industrial sector, which will suffer from the drop in international demand. This will adversely affect employment and thus worsen the unemployment rate. A rate which was 9.2% in 2019 and which, with the coronavirus crisis, will rise to 12.5% in 2020, warns the IMF. The same observation is made for our Algerian neighbours, whose unemployment rate will soar to 15.1%.
Tourism and the industrial sector hit by COVID-19 lockdown
Tourism and the industrial sector remain the most affected sectors by the crisis due to the drastic drop in international demand. The IMF expects unemployment to rise by 3.3 points in 2020 to peak at 12.5% (compared to 9.2% in 2019). The IMF foresees the same misfortune for neighbouring Algeria, which will see its unemployment soar to 15.1%.
The IMF also provided forecasts for other macroeconomic indicators. For example, the monetary institution expects a widening of the trade deficit from -4.1% in 2019 to around -7.1% in 2020. The GDP balance will also fall to 7.8% (compared to 4.1% in 2019). On a more positive note, the IMF forecasts a resilient inflation rate of 0.3% in 2020, compared to 3.5% in Algeria and more than 6% in Tunisia.