An extract for a recent report done on the region by Standard Chartered Bank
INTERNATIONAL. The Maghreb countries, Tunisia, Morocco and Algeria, are very different places. Tunisia is the star performer, Morocco follows and despite its oil wealth, Algeria has been disappointing, says a new report from Standard Chartered
June 2008.
Tunisia has achieved remarkable stability and steady growth over the past decade. We can expect this to be sustained, Standard Chartered predicts. Morocco, despite considerable challenges ahead, has a large population, a well-educated elite, abundant investment opportunity and will continue to reform.
Morocco
Morocco is a dichotomy. It has the highest illiteracy rate in the MENA region (almost a third of the population) and vast sections of the population work in agriculture. At the same time, though, Casablanca is home to the second largest stock exchange in Africa (after Johannesburg) and the country has taken big steps to diversify its economy, generating numerous growth opportunities in tourism, banking and manufacturing.
Economic management has been disciplined. Tight monetary policy has led to an average annual inflation of 1.7% for the decade until 2006 when it peaked at 3.4%, to fall back again at 2.1% in 2007. A budget deficit
of only 0.7% in 2007 and a trade balance of only -0.1% of GDP in 2007 were impressive achievements in the context of a global commodity shock.
Since the enthronement of King Mohammed VI in 1999, the country has seen a progressive overhaul of its laws. This has included a modernisation of business regulation, anti-corruption measures against civil servants, progress on the social front, notably a marked improvement in the legal status of women. This has helped improve government legitimacy. Moreover, improved tax collection, a 19% increase in 2007, supports better public services too.
The main weakness is the country's over reliance on agriculture. As a result, growth is volatile. Real GDP growth was 2.4% in 2005, 7.8% in 2006, and 2.7% in 2007 and should bounce back to around 5.0% in 2008. The sector is reliant on climate, and droughts have damaged the economy in 2005 and 2007. Farms employ 40% of the workforce and contributes anywhere between 11% to 18% of GDP, depending on the harvest.
Real growth of the non agricultural sector is steadier at 6.0% in 2005, 4.7% in 2006, and 6.0% in 2007. Unemployment has decreased from 11.0% in 2005 to 9.7% in the latest print.
Major plans to diversify the economy away from agriculture have been put in place. The 'Plan Azur Vision 2010' aims to attract 10 million visitors annually by 2010. There is also a plan specifically targeting agriculture called 'Plan Maroc Vert'. A dedicated agency, the Agence de Developement Agricole (ADA), has been established to lead modernisation of the sector.
The diversification plans are creating interesting opportunities. In both 2006 and 2007 the number of tourist arrivals grew by 13%. Hotel capacity remains tight and more construction is needed. The increasing number of flights from Europe helps fuel this growth. Construction is booming in Morocco not only because of tourism but also on the back of official mega residential projects which cater to folk from France and Spain looking to retire there.
The banking sector has an important role to play in Morocco's development. The boom in infrastructure spending and real estate led to an increase in mortgage loans in 2007 of 43.8% year on year, albeit from a very low base. The sector has also benefited from reforms. In 2006, the central bank was guaranteed complete independence, while Basel II principles have been introduced for the commercial banks. The sector has consolidated (from 21 banks in 2000 to 16 in 2006) while banks profits rose 54% year on year in 2006 alone.
Domestic consumption has been rising steadily too. There was a 25% annual increase in cell phone subscriptions in fourth quarter 2007 only. GDP per capita grew 35% since 2003 to reach US$ 4,000 in 2008.
Industrial production and the development of free trade zone platforms have also blossomed in recent years. The Tangier Med project on the northern Mediterranean coast has a cost of € 1.5billion and has chosen Dubai's DP World as its operator. The harbour will handle 3.5 million shipment containers a year in its first phase. When the project is completed in 2015 it will handle up to 8 million containers. It has already become the largest port in all the Mediterranean and Africa and is bound to become a crucial transport and logistic hub for the Western Mediterranean.
The success of this endeavour has led to the launch of Tangier Med 2 and the announcement by the Franco-Japanese car consortium Renault Nissan that it will build its biggest and most competitive car plant to date with up to €1 billion worth of investments. A direct rail line will be built to the port, more than 6,000 jobs have been promised just from the car maker and the plant will be able to produce up to 400,000 cars a year when completed. This export zone will also benefit other manufacture industries such as textiles and auto parts firms.
Morocco's challenges are related to illiteracy and the overdependence. They are being addressed. The economy is becoming more dynamic and better diversified.
June 2008.
Tunisia has achieved remarkable stability and steady growth over the past decade. We can expect this to be sustained, Standard Chartered predicts. Morocco, despite considerable challenges ahead, has a large population, a well-educated elite, abundant investment opportunity and will continue to reform.
Morocco
Morocco is a dichotomy. It has the highest illiteracy rate in the MENA region (almost a third of the population) and vast sections of the population work in agriculture. At the same time, though, Casablanca is home to the second largest stock exchange in Africa (after Johannesburg) and the country has taken big steps to diversify its economy, generating numerous growth opportunities in tourism, banking and manufacturing.
Economic management has been disciplined. Tight monetary policy has led to an average annual inflation of 1.7% for the decade until 2006 when it peaked at 3.4%, to fall back again at 2.1% in 2007. A budget deficit
of only 0.7% in 2007 and a trade balance of only -0.1% of GDP in 2007 were impressive achievements in the context of a global commodity shock.
Since the enthronement of King Mohammed VI in 1999, the country has seen a progressive overhaul of its laws. This has included a modernisation of business regulation, anti-corruption measures against civil servants, progress on the social front, notably a marked improvement in the legal status of women. This has helped improve government legitimacy. Moreover, improved tax collection, a 19% increase in 2007, supports better public services too.
The main weakness is the country's over reliance on agriculture. As a result, growth is volatile. Real GDP growth was 2.4% in 2005, 7.8% in 2006, and 2.7% in 2007 and should bounce back to around 5.0% in 2008. The sector is reliant on climate, and droughts have damaged the economy in 2005 and 2007. Farms employ 40% of the workforce and contributes anywhere between 11% to 18% of GDP, depending on the harvest.
Real growth of the non agricultural sector is steadier at 6.0% in 2005, 4.7% in 2006, and 6.0% in 2007. Unemployment has decreased from 11.0% in 2005 to 9.7% in the latest print.
Major plans to diversify the economy away from agriculture have been put in place. The 'Plan Azur Vision 2010' aims to attract 10 million visitors annually by 2010. There is also a plan specifically targeting agriculture called 'Plan Maroc Vert'. A dedicated agency, the Agence de Developement Agricole (ADA), has been established to lead modernisation of the sector.
The diversification plans are creating interesting opportunities. In both 2006 and 2007 the number of tourist arrivals grew by 13%. Hotel capacity remains tight and more construction is needed. The increasing number of flights from Europe helps fuel this growth. Construction is booming in Morocco not only because of tourism but also on the back of official mega residential projects which cater to folk from France and Spain looking to retire there.
The banking sector has an important role to play in Morocco's development. The boom in infrastructure spending and real estate led to an increase in mortgage loans in 2007 of 43.8% year on year, albeit from a very low base. The sector has also benefited from reforms. In 2006, the central bank was guaranteed complete independence, while Basel II principles have been introduced for the commercial banks. The sector has consolidated (from 21 banks in 2000 to 16 in 2006) while banks profits rose 54% year on year in 2006 alone.
Domestic consumption has been rising steadily too. There was a 25% annual increase in cell phone subscriptions in fourth quarter 2007 only. GDP per capita grew 35% since 2003 to reach US$ 4,000 in 2008.
Industrial production and the development of free trade zone platforms have also blossomed in recent years. The Tangier Med project on the northern Mediterranean coast has a cost of € 1.5billion and has chosen Dubai's DP World as its operator. The harbour will handle 3.5 million shipment containers a year in its first phase. When the project is completed in 2015 it will handle up to 8 million containers. It has already become the largest port in all the Mediterranean and Africa and is bound to become a crucial transport and logistic hub for the Western Mediterranean.
The success of this endeavour has led to the launch of Tangier Med 2 and the announcement by the Franco-Japanese car consortium Renault Nissan that it will build its biggest and most competitive car plant to date with up to €1 billion worth of investments. A direct rail line will be built to the port, more than 6,000 jobs have been promised just from the car maker and the plant will be able to produce up to 400,000 cars a year when completed. This export zone will also benefit other manufacture industries such as textiles and auto parts firms.
Morocco's challenges are related to illiteracy and the overdependence. They are being addressed. The economy is becoming more dynamic and better diversified.