Studi Economici
Morocco

Morocco

Population 36.0 million
GDP 3,188 US$
B
Country risk assessment
A4
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Synthesis

MAJOR MACRO ECONOMIC INDICATORS

  2019 2020 2021 (e) 2022 (f)
GDP growth (%) 2.6 -6.3 5.7 3.0
Inflation (yearly average, %) 0.2 0.7 1.3 1.5
Budget balance (% GDP) -4.1 -7.6 -6.7 -6.5
Current account balance (% GDP) -3.7 -1.5 -3.7 -3.5
Public debt (% GDP) 64.8 76.4 77.9 79.0

(e): Estimate (f): Forecast

STRENGTHS

  • Favourable geographical position, close to the European market
  • Strategy to move upmarket and diversify production in industry
  • Political stability and commitment to reform
  • Growing integration into the African market
  • Support from the international community, particularly the European community, which is supporting green investments in Morocco: USD 300 million, through 2 projects.
  • Significant and growing market

WEAKNESSES

  • Economy highly dependent on the performance of the agricultural sector (12% of GDP and 30% of the population), therefore on climate and water availability, as well as on the European Union
  • Competition from other Mediterranean countries such as Turkey or Egypt
  • Significant social and regional disparities, between cities and the countryside, with recurrent discontent in certain regions. The poverty rate remains high.
  • High unemployment rate, especially among young people, low participation of women in the labour market, and lack of housing
  • Low productivity and competitiveness

RISK ASSESSMENT

Growth will moderate after a strong rebound 

After rebounding strongly in 2021 thanks to the recovery of household consumption (57% of GDP in 2020) and a favourable base effect, economic growth is expected to slow in 2022. Although extremely exposed to variations in weather conditions, household consumption will remain an engine of growth in 2022 as incomes improve with the strong pickup in the agricultural sector (12% of GDP, 30% of the labour force) and increased remittances from Moroccans abroad (5% of GDP in 2020). Despite making a more moderate contribution in 2022, consumption will benefit from progress in vaccination and contained inflation, after a good agricultural season. The Mohammed VI Investment Fund, which focuses on the tourism (12% of GDP), transport and infrastructure sectors, will continue to stimulate investment. Under the 2021-2025 Industrialisation Acceleration Plan, which promotes roads, ports and railways, public investment could also provide new opportunities for the private sector. FDI (35% from France), which were modest in 2021, will increase in 2022 with the establishment of a Chinese vaccine manufacturing plant in Morocco. Manufacturing exports, supported by the recovery in Europe (80% of exports), also drove growth in 2021. Exports of automotive parts, food products and phosphate (and its derivatives) rebounded with rising global demand. Despite the shortage of semiconductors, which will continue to affect production in the automotive sector in 2022, the construction of a new automotive plant in the city of Kenitra is expected to boost vehicle production capacity, and thus exports. After a sluggish year 2021, tourism, whose revenues account for 22% of total exports, and the hotel and restaurant sectors, are expected to recover in 2022 without regaining their pre-crisis levels, given health-related travel restrictions. While the increase in export earnings will therefore be constrained, it will mitigate the impact of the increase in investment-related imports on the net contribution from foreign trade.

 

Small reduction in the twin deficits 

The government deficit was reduced only slightly in 2021, amid the persisting effects of the crisis, and is expected to stabilise in 2022. Although the government has announced fiscal consolidation efforts, the expansion of the tax base as well as the goods and services subject to VAT is not expected to offset the increase in capital spending (notably through infrastructure investment) and social spending (mainly in health). Public debt, 25% of which was held by external creditors at the end of 2020, has increased, despite substantial privatisation revenues. However, bilateral and multilateral creditors finance nearly 70% of external public debt, lessening the burden (8% of projected expenditures in the 2022 Finance Bill).

 

The current account deficit deteriorated in 2021 because of the increased trade deficit. While the surge in oil prices (hydrocarbons make up 12.5% of imports) and firmer domestic demand pushed up the import bill (21% allocated to capital goods and machinery), the increase in manufacturing exports was unable to make up for the weak recovery in services exports, which reflected the impact of the still recovering tourism sector. After a modest upturn in 2021, tourism revenues should continue to rebound in 2022, improving the services surplus. However, the trade deficit will continue to weigh on the current account deficit, resulting in a relatively unchanged balance in 2022. The secondary income surplus will continue to be driven by expatriate remittances. The European recovery will encourage capital repatriation, causing the primary income deficit to widen. External financing needs will be met by foreign exchange reserves, which still provide more than six months of import coverage, and the resumption of FDI, if tensions with Algeria do not discourage investors.

 

Islamists suffer a major defeat amid a tense social climate

The October 2021 legislative elections resulted in the formation of a new coalition, led by Prime Minister Aziz Akhannouch. The liberal-centre-right coalition is composed of the liberal National Rally of Independents (RNI), the Authenticity and Modernity Party (PAM) and the Istiqlal (Independence) Party (PI). The moderate Islamist Justice and Development Party (PJD), which has led the government since 2011, saw its share collapse from 125 seats in the assembly to only 13 seats out of 395. The crisis has exacerbated social demands, leading to a major reshuffle in the assembly. Despite the measures to support households, rising unemployment, income losses and growing inequality will continue to fuel discontent. Further health restrictions could also lead to demonstrations. To restore stability to the social situation, the RNI is set to follow a reform agenda backed by the Royal Court, which acts as final arbiter and decision-maker.

 

Externally, relations with Algeria have deteriorated over the issue of Western Saharan sovereignty, and the two countries formally severed diplomatic ties at the end of August 2021. In the absence of progress in recent mediation efforts, the dispute between Morocco and the Algerian-backed Polisario Front, which seeks independence for Western Sahara, will keep tensions running high.

 

Last updated: February 2022

Payment

Bank transfers are becoming the most popular means of payment for both domestic and international transactions. Cheques are still commonly used as instrument of payment and also constitute efficient debt recognition titles: debtors may be prosecuted if they fail to pay the amount owed. Bills of exchange also constitute an attractive means of payment, because they are a source of short-term financing by means of discounting, instalment, or transfer. Promissory notes are used to record the financial details of personal debts, business debts and real estate transactions. They are legally binding contracts that can be used in a court of law if the debtor defaults. A promissory note acts as solid evidence of an agreed payment, and subsequently debt in case of dispute.

Debt collection

Amicable phase

Debt collection must begin with an attempt to reach an amicable settlement. Creditors attempt to contact their debtors through different means (telephone calls, written reminders such as formal letters, emails or extrajudicial notifications, etc.). Amicable settlement negotiations can be intense, and cover aspects such as the number of payment instalments, write-offs, guarantees/collateral, and grace period interest. Moroccan law states that a lawyer can acknowledge the signature of the debtor via payment plans, which are signed, certified, and legalized by the competent authorities in Morocco. The creditors’ lawyer can subsequently use this payment agreement as debt recognition in case of legal action.

 

Legal proceedings

Morocco has a legal system based on French legal tradition and courts based on Islamic traditions (which relate exclusively to the personal status of litigants). Courts include proximity courts (juridictions de proximité) in charge of settling disputes between individuals, Courts of First Instance (tribunaux de première instance) dealing with all civil matters, Commercial Courts dealing with business disputes, Appellate Courts (cours d’appel) dealing with civil and administrative matters, and a Court of Cassation (Cour de cassation). 

 

Emergency proceedings

Where the debt is linked to a recognised title or promise, it is possible to obtain an order for payment. To do this, an application must be sent to the registry of the competent court. The debt must be proven, liquid (i.e. free), payable and not disputed. If the defendant does not file a defence within eight days, it is possible to obtain an enforceable decision. If the defendant submits a defence within eight days of receiving the order for payment, the case is returned to the ordinary procedure. However, the appeals chamber of the court of first instance or the court of appeal may, by reasoned judgment, suspend enforcement in whole or in part.

 

Ordinary proceedings

A writ of summons is sent by the creditor’s representative to the relevant court and served by a bailiff to the debtor, who may subsequently obtain legal representation in the period prescribed by the judge and file a counter claim. Several hearings may be required for the exchange of written submissions, transmissions of documents and to produce the relevant evidence.

The main hearing is set by the judge to hear the presentation of the pleadings. Discussions and pleadings are conducted by the judge during the public hearing. The case is then taken under deliberation to allow judges to discuss the means, grounds, and pronouncement that make up the content of the judgment. After the sitting of the judgers, a reasoned judgment is rendered. It can usually be obtained within an average delivery time of 14 months.

Enforcement of a court decision

Once all appeal venues have been exhausted, a judgment becomes final and enforceable. Garnishee orders are normally efficient for seizing and selling the debtor’s assets.

According to Moroccan law, commercial courts are obliged to recognize judgments rendered abroad, even if there is no convention signed for this purposes with the issuing country. In order to be recognized and enforced, the original copy of the foreign judgment must be provided to the court with a certificate of non-appeal. When a foreigner gets final judgment that they want to enforce in Morocco and, if not, when seeking enforcement of a Moroccan judgment abroad, they must follow exequatur proceedings. There are two enforcement procedures. The first is uniquely Moroccan, whereas the second is fixed by judicial bilateral agreement between Morocco and other countries, including Germany, Belgium, the United States of America, the United Arab Emirates, Spain, France, Italy and Libya.

Insolvency proceedings

 

Insolvency proceedings are regulated by Book V of the Commercial Code. It provides for prevention of difficulties (alert procedure and amicable settlement procedure) as well as formal insolvency procedures (judicial redress proceedings and judicial liquidation proceedings).

Because of the COVID-19 situation, Morocco has taken two measures in the framework of the insolvency proceedings:

The possibility for debtor companies to initiate the procedure to request a grace period to enable them to legally suspend payments (if the insolvency is caused by COVID-19).

The possibility of obtaining a stimulus credit dedicated to companies impacted by COVID-19.

 

Alert procedure

The alert procedure is initiated by a business’ partners or auditors (external auditors hired by the company to rectify the financial situation), who are required to notify the company manager of any opportunities to redress the situation within eight days. If no steps are taken to remedy the situation within 15 days, a general assembly must be convened to take a decision on how to redress the situation based on the auditor’s report. 

 

Amicable settlement procedure (conciliation)

Amicable settlement procedures can only be implemented by a commercial company, trader, or artisan, who is experiencing financial difficulties but is not yet cash flow insolvent. Once initiated, the debtor is placed under the supervision of the Court. The Court subsequently appoints an external conciliator for a limited period of three months to assist the debtor in reaching an agreement with its creditors. A settlement can be reached with all creditors or the debtor’s “main creditors”. Creditors are entitled to their entire claim, but the conciliator may propose an arrangement or creditors may assign a portion of the debt if they so wish. Once approved by the Court, all judicial proceedings relating to debts covered by the agreement are suspended for the duration of the amicable settlement agreement.

 

Safeguard procedure

This is mechanism is intended to allow a company to reorganize in order to continue to survive. To benefit from it, the company must establish that it is not in a state of cessation of payments. However, in the context of this procedure, it is still possible to negotiate with your creditors, in order to avoid arriving at to this cessation of payments, to the receivership proceedings. It is the company that seizes the court, which pronounces a judgment of opening of the safeguard procedure. The procedure starts with a six-month observation period (renewable once) during which the insolvency administrator, in collaboration with the manager, draws up a “economic and social balance sheet” (BES) for the company: an update on the origin of the difficulties, he current financial situation, the corrective measures to be envisaged and the resulting prospects. During this period, the company takes appropriate measures to correct the situation, and it helps the administrator to develop a backup plan. The adoption of such a plan by the court marks the end of the observation period and the beginning of the actual plan, which can last up to five years. Here again, the manager remains master aboard his company but, above all, the company will benefit from radical measures that the court can only impose:

  • suspension of maturities of debts;
  • stop individual prosecutions;
  • obligation for all creditors to declare their claims;
  • stop interest rate.
Judicial RECEIVERSHIP

This procedure is only available for debtors that have become insolvent (état de cessation de paiements), but whose financial situation is not irreparably compromised. An insolvency judge and an office holder (the person appointed by the court as part of an insolvency or liquidation; also acts as the syndicate) are appointed by the court. During the process, the debtor company and its management remain in possession of the company’s assets and the debtor continues its business. The receivership procedure can result in either the reorganisation of the debtor’s business or its liquidation. The office holder is required to prepare a report on the situation of the company within four months from the opening of the proceedings. In his report, the office holder will either recommend a continuation plan for the debtor, the sale of the business, or liquidation. The court is then required to reach a decision on the fate of the debtor, based on the report. There is no direct vote by the creditors on the options available to the debtor during the procedure.

 

Judicial liquidation

The judgment initiating the procedure makes all the debts immediately due and payable, the creditors within a period of two months must present their claims. Moroccan creditors have two months to submit their declarations; creditors residing abroad have a period of four months. Liquidation proceedings may terminate prematurely before a distribution in liquidation if the debtor has no more debt, the office holder has sufficient funds to pay all the creditors in their entirety, or the debtor does not have enough assets to cover the costs of the liquidation procedure.

Under Moroccan law, there are no specific rules on the priority of claims in the event of insolvency. Nevertheless, there are some privileged creditors such as: the employees, the public treasury, the social agencies, the creditors of a collective conciliation, finally the unsecured creditors.

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