Morocco - Overview of economy

Morocco's domestic economy is relatively diversified. The agricultural sector plays an important role, accounting for 15 to 20 percent of the GDP, depending on weather conditions. In 1999, the sector accounted for 15 percent of the GDP and employed some 50 percent of the labor force . The sector's output, however, varies from one year to another, due to its dependence on rain-water for irrigation. The largest contributor to the GDP is the services sector. The well-developed tourism and services sectors accounted for 52 percent of the GDP and employed 35 percent of the labor force in 1999. The expanding industrial sector has also become a major contributor to the GDP in recent years, accounting for 33 percent of the GDP in 1999. Industrial exports include textiles, clothing, shoes, and, most important, raw phosphates and processed products, including phosphoric acid and fertilizers. Morocco is the world's largest exporter of

raw and processed phosphates, but the phosphates sector contributes only 3 percent to the GDP. The fishing sector is also important, employing some 300,000 people.

Morocco entered the 20th century as a colony divided between France and Spain, with France dominating the larger area. It continued to be under French control during World War II, and its demands for independence were not recognized until 1956, when Sultan Mohammed V was declared king of Morocco. Spain relinquished its claims over Morocco around the same time but retained a small number of cities and territories. Mohammed's son, Hassan II, who succeeded his father in 1961 and ruled until 1999, is considered the father of modern Morocco.

Morocco is primarily a free-market country with some state control. The government has significantly reduced its role in the economy since the 1990s, removing trade barriers and selling several state-owned enterprises. Despite occasional political violence, it has a fairly stable, multiparty political system headed by the king, and it enjoys the strong political and economic support of the United States and the European Union. Economic growth has been sluggish since the 1990s, partly as a result of dependence on agriculture, which has been affected by recurring droughts. The GDP real growth rate was estimated to be 0.8 percent in 2000. Mining, mostly of phosphates, is concentrated in Khourigba, Youssoufia, and the Western Saharan mine of Boucraa. Manufacturing, retail trade, and services are centered in urban centers, mostly Rabat and Casablanca.

Neither the agricultural sector nor the emerging industrial sector is capable of providing enough jobs to counteract Morocco's long-standing high unemployment rate. The problem of unemployment especially high among university graduates is exacerbated by the rapid population growth. Unemployment reached 19 percent in 1998; by contrast the unemployment rate in the United States in 1999 was 4.2 percent. Unemployment in urban areas is estimated to be higher than 22 percent. Although the government has made it a priority issue, unemployment will present a serious challenge for some time to come.

Morocco's foreign debt in 1999 was estimated at US$18.7 billion. About 50 percent is owed to state creditors within the Paris Club, a group of developed countries that extends credit and loans to developing countries, 30 percent is owed to international institutions, and 15 percent is owed to commercial banks, while the remaining 15 percent is owed to other creditors. The largest fraction of the Paris Club debt is with France (48 percent), followed by Spain and the United States, who each account for 15 percent. Debt service represents 24.5 percent of exports of goods and services. The country's debt burden has declined steadily since the mid-1990s: In 1992, Morocco rescheduled its debt to the Paris Club, and in 1996, the French and Spanish governments agreed to relieve part of the country's debts by converting them into investments.

Morocco's economic difficulties—trade imbalance and high unemployment—are offset by tourism receipts, remittances from its migrant workers abroad, and foreign investments. Some 2.35 million tourists visited the country in 1999, an 18-percent increase over the preceding year. Also in 1999, Moroccan workers, mostly in Europe, contributed some US$1.94 billion, a decline of 1.6 percent over the preceding year. Income from foreign investments tripled that year, mostly as a result of the sale of a mobile-phone license to a Spanish company.

Government bureaucracy is a major impediment to the conduct of business in Morocco. Bureaucratic inefficiencies permeate all government ministries and the commercial court system. Corruption is widespread at all levels of the public sector , largely as a result of low wages and difficult living conditions.