Morocco's Economic Resilience Amid Challenges: Bank Al-Maghrib's 2023 Insights

Despite facing a tapestry of challenges, Morocco's economy demonstrated resilience in 2023, achieving a 3.4% growth rate. This was detailed in the Bank Al-Maghrib's annual report, presented to King Mohammed VI on Monday.

The report from Morocco’s central bank provided a comprehensive overview of the country's economic, monetary, and financial landscape. Despite a difficult international environment, consecutive years of drought, and the devastating earthquake in the Al Haouz region, the national economy showed significant improvement.

Cash Circulation and Financial Stability

A standout revelation from the report was the substantial level of cash circulation in Morocco, which reached nearly 30% of GDP. Governor Abdellatif Jouahri expressed ongoing concern over this figure, noting its place as one of the highest globally. Banknotes in circulation increased by 10% to 2.7 billion notes, amounting to MAD 408 billion, while coins rose by 2.9% to 3.2 billion pieces. Cash transactions surged by 11% to MAD 412.8 billion, with the 200 dirham note dominating at 57% and the 1 dirham coin at 29%.

In response to these trends, a committee chaired by the central bank and comprising banks, relevant ministries, and researchers has been established. Their mission is to analyze the underlying reasons for high cash usage and propose solutions to manage this phenomenon.

Inflation and Job Market Dynamics

Encouragingly, inflation, which had peaked at 10.1% in February, decreased to an average of 6.1% for the year, down from 6.6% in 2022. This reduction was attributed to lower external pressures, government measures, and the central bank's tightened monetary policy, which still supported banks' liquidity needs.

However, the job market faced difficulties, with approximately 157,000 jobs lost, largely in the agricultural sector. While other sectors showed relative improvement, it was insufficient to counterbalance the losses.

Fiscal Strength and External Accounts

Efforts to bolster fiscal health continued, with the deficit decreasing to 4.4% of GDP. This improvement was driven by robust tax revenues, innovative financing mechanisms, and resources mobilized through a special fund created by royal decree to manage earthquake impacts.

On the external front, the current account deficit fell to 0.6% of GDP, influenced by the automotive industry's dynamism and increased tourism revenues and remittances from Moroccans abroad. Bank Al-Maghrib’s official reserve assets rose to MAD 359.4 billion, equivalent to about 5.5 months of imports.

Counterfeit Currency and Digital Transition

The report highlighted a continuing decline in currency counterfeiting, with the rate dropping to 2.3 counterfeit banknotes per million in circulation, down from 5.2 in 2019. In total, 6,092 counterfeit banknotes were detected, amounting to MAD 837,000, with the 200 dirham note being the most frequently counterfeited.

Moreover, the report noted that all requests for identification and secure documents, such as biometric passports and electronic driver’s licenses, were met by Dar As-Sikkah, the national printing house.

Moving Forward: Reform and Innovation

Despite various constraints, Morocco pressed on with its reform agenda and major economic and social projects, expanding their scope. This steadfast approach, coupled with Morocco’s credibility as a reliable partner, earned positive assessments from international institutions, facilitating better access to financial markets and credit.

Maintaining momentum, consolidating gains, and ensuring sustainability are the new challenges. The social dialogue must now focus on improving working conditions, social justice, and reducing disparities. Pension system reforms remain crucial due to their fragile balances.

For a successful transition to a green and sustainable economy, policies addressing climate change must be accelerated and more effectively coordinated. The digital transition, poised for a new strategy, relies on strengthening infrastructure, improving education quality, promoting digital culture, and fostering an integrated digital ecosystem.

In the financial sector, Bank Al-Maghrib plans to create a special fund for new financial technologies, providing financial support and implementation assistance to project holders.

Governor Jouahri concluded that Morocco remains committed to its development path and transition to emerging market status. This transition hinges on public policy focusing on development fundamentals, mobilizing all active forces in a spirit of seriousness and responsibility, and prioritizing national interests.