Morocco's Economic Resilience Shines in the Wake of Al-Haouz Earthquake

In a display of remarkable economic fortitude, Morocco has emerged from the devastating Al-Haouz earthquake with its investor confidence largely unscathed, according to a recent report by the prestigious think tank Policy Center for the New South (PCNS).

The September 8, 2023 earthquake, which registered a magnitude of 7.0, inflicted a heavy toll on the North African nation. Nearly 3,000 lives were lost, with an additional 4,661 individuals sustaining injuries, of which 1,139 were classified as severe. The material damage was equally staggering, with 59,674 buildings affected, 32% completely destroyed and 68% partially damaged.

Despite this catastrophe, the report indicates that Morocco's financial markets remained surprisingly stable. The Casablanca stock exchange showed no abnormal trends post-earthquake, save for a brief dip in tourism-related stocks, which swiftly recovered. Treasury bond interest rates and the exchange rate also held steady, reflecting robust economic fundamentals.

This stability is particularly noteworthy given the typical investor response to natural disasters. As the PCNS report explains, "High social costs of the damages can imply a greater sovereign risk aversion among investors." It further elaborates that earthquakes often "compromise fiscal trajectories, as investors perceive natural disasters as a negative shock that can put debt on an unsustainable path, and eventually trigger a sovereign default."

However, Morocco's case proved exceptional. The market appeared "insensitive to the Natural Disaster," with local investors continuing to subscribe to treasury bonds, leaving financing costs unchanged. This economic resilience was further bolstered when Morocco secured approval for a $5 billion Flexible Credit Line from the International Monetary Fund (IMF) shortly after the earthquake.

While the national economy demonstrated remarkable stability, the epicenter of the earthquake, Al-Haouz province, bore the brunt of the economic impact. The province suffered a staggering 10.2% loss in Gross Regional Product (GRP). Neighboring provinces Taroudant and Chichaoua also experienced significant effects.

On a national scale, the PCNS analysis concluded that Morocco's GDP contracted by 0.24% in 2023, equating to approximately MAD 3 billion ($300 million). The Marrakesh region's economic activity declined by 1.3%, while Al-Haouz province experienced the aforementioned 10.2% drop in GRP.

In response to this tragedy, the Moroccan government has launched an ambitious five-year reconstruction plan, allocating a total of MAD 120 billion ($12 billion). This comprehensive package is divided into two pillars:

1. Emergency Assistance and Infrastructure Rebuilding: MAD 22 billion ($2.2 billion)
   - MAD 8 billion ($800 million) for household aid and financial assistance for housing
   - MAD 14 billion ($1.4 billion) for infrastructure rebuilding from 2023 to 2028

2. Economic Stimulation in the High Atlas Region: MAD 98 billion ($9.8 billion)

The PCNS report projects that the first pillar of this recovery plan will yield a 0.1 percentage point increase in national growth and a significant 1.2 percentage point increase for the High Atlas provinces, including Al-Haouz, between 2024 and 2028.

The impact of the second pillar is expected to vary based on different financing scenarios. These range from a 0.4 percentage point increase with "new money" financing to a modest 0.03 percentage point increase if the funds are reallocated from existing state investments.

As Morocco continues its path to recovery, the nation's economic resilience in the face of natural disaster serves as a testament to its robust financial foundations and strategic crisis management. The coming years will undoubtedly be crucial as the country works to rebuild and reinvigorate the affected regions, all while maintaining the confidence of both domestic and international investors.