MOROCCO

Economic growth in the North African state of Morocco remains solid even in the face the global economic downturn, the international Monetary Fund (IMF) has disclosed.

In 2009 Morocco is expected to register an almost equal real GDP growth with what it achieved in the preceding fiscal year.

'Despite the world economic slowdown, Morocco's economic performance has rem ained solid,' said Mark Lewis, leader of an IMF mission that visited Rabat from November 2-13, 2009.

Real GDP growth was 5.6 per cent in 2008, and it is expected to be around 5 per cent in 2009, sustained by strong domestic demand and exceptional agricultural production, according to an IMF press release received by PANA in Addis Ababa on Sunday. 'Consumer price inflation will drop to less than 2 per cent in 2009, reflectin g, among other factors, the decline in world commodity prices,' the press release quoted a statement by the IMF mission to Rabat. 'The current account deficit is expected to improve, assuming that the recent signs of a rebound continue in the last part of the year.'

The IMF mission was in Rabat for more than a week for 'Article IV' consultat ion with Moroccan authorities. Article IV is part of the Articles of Agreement of the IMF adopted in July 1944. It states Obligations Regarding Exchange Arrangements.

Usually Article IV consultations with member countries take place once a year and most of them are published as IMF Article IV Staff Reports.

"In the context of the 2009 Article IV consultation discussions, the mission reviewed recent economic developments and the authorities' strategy for mitigating the impact of the global crisis on Morocco, and discussed policies to boost economic growth, income, and employment,' the mission said in statement it issued at the conclusion of the visit.

The mission met with Moroccan ministers, senior government officials, Governor of the Central Bank, as well as with representatives from the private sector and labour unions.

The mission also stated that the country's fiscal policy will appropriately loosen in 2009 and 2010, reflecting in good part the authorities' counter-cyclica l measures.

'Over the medium term, fiscal policy should aim to gradually bring the budget deficit below 3 per cent of GDP, without jeopardizing the economic rebound,' it said. 'Important reforms in the public finance area are ongoing, including tax reforms, and efforts to gradually replace the current system of subsidies by targeted measures to assist the low-income segments of the population.'

According to the IMF, Morocco's Central Bank has responded appropriately to the evolving economic and financial conditions through its interest rate policy and liquidity management tools.

The mission, therefore, noted that the Bank has the necessary tools, resources, and analytical framework in place should monetary policy evolve to an inflation targeting framework.

'The banking sector remains solid, and has largely been untouched by developments in international financial markets,' according to the mission's statement. 'Given the rapid credit growth in recent years, the Central Bank continues to pay close attention to credit quality.'

Nevertheless, the IMF warns that strong and sustained economic growth in Morocco will depend on reforms aimed at increasing the productivity and competitiveness of the economy and boosting the country's ability to compete on external markets.

The authorities are therefore undertaking a wide range of reforms, including in the sectors of justice, agriculture, energy and education, IMF acknowledged.

'Success in these efforts will raise investment and output and help address key social challenges, including youth unemployment," the statement said.

Addis Ababa - 15/11/2009

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