The stability of Morocco, an imperative for Europe (Institut Montaigne) The stability of Morocco, an imperative for Europe (Institut Montaigne)

This is what emerges from the new report drawn up by the Institut Montaigne, entitled: “The stability of the Maghreb, an imperative for Europe”. This 116-page document is structured around four main axes. Initially, it establishes an overall diagnosis of the relations between Europe and three countries of the Maghreb, namely Tunisia, Algeria and Morocco. Secondly, it draws up an inventory of their economic models, and describes the economic impact of Covid, before delivering its recommendations for getting out of the current crisis. In this article, we will focus on the elements that relate to Morocco.

The Maghreb “risk” is a European risk

"The destiny of France and Europe is closely linked to that of the Maghreb countries, due to the significant flows of men, ideas, goods and money between the two shores of the Mediterranean", writes Hakim El Karoui, senior fellow of the Tink Tank and author of the report. “However, the importance of the Maghreb for Europe is largely underestimated, and the Europeans do not seem to have integrated Morocco, Algeria and Tunisia into their overall strategic thinking. While respecting their sovereignty, Europe should give itself the means to support the economies of these countries, guarantees of social and therefore political stability”.

“While Europe and the Maghreb have been hit hard by the Covid-19 crisis, they face different situations,” he underlines. Indeed, unlike the Europeans, who are rich and united by the same currency, the Maghreb countries are part of the middle-income countries. They are not united and have money creation capacities limited by the fragility of their economies. “However, the European recovery plan of 750 billion euros, intended to ensure the stability of its members, is not intended to benefit its 'near abroad', including the Maghreb. However, given the intertwining of peoples and economies, the North African 'risk' is a European risk”.

Indeed, the destabilization of one of these three countries because of the crisis, would lead to undesirable chain reactions (emigration, growing influence of other powers). “It is therefore urgent that Europe, and in particular Italy, Spain and France, deploy reinforced economic and financial cooperation with the Maghreb countries, which is morally necessary and politically useful”.

Morocco, a challenge for China

“Europe considers that the Maghreb is part of its traditional backyard and that no competing or even hostile power can gain there a deep and lasting influence that would allow it to compete with Europe, or even hinder it”. However, the Kingdom is of interest to other major foreign powers, the main one being China.

“Morocco is at the heart of regional and international interests, in particular because it is a crossroads for trade with Europe and Africa,” the report states. “If the countries of Southern Europe remain the main providers of FDI in Morocco, in particular France (35% of total FDI in 2019), Morocco is of increasing interest to China. The Chinese diaspora is relatively large on the Moroccan coast, the country looks closely at logistics facilities, especially in Tangier, and exports a lot of manufactured goods and equipment to Morocco. It also built a partnership with Morocco during the Covid-19 crisis (shipping of masks, advanced vaccine testing, massive distribution of Chinese vaccines, etc.)”.

Moreover, “between 2017 and 2018, the United Arab Emirates represent, for Morocco, a dynamic and growing source of financial flows”. The country has also moved closer to the USA, after the recognition of Moroccan sovereignty over Western Sahara. “The traditional preponderance of France is therefore tending to decline, to the benefit of other international powers”.

Employment and education, the great evils of Morocco

After a diagnosis of relations between the EU and Morocco, the report painted a portrait of the economic and social situation in the Kingdom. This, already worrying, has further deteriorated with the Covid crisis.

The report thus notes that in Morocco, the unemployment rate, particularly among young people and women, remains high. Prime-age men working in the tourism and transport sectors are also increasingly affected. “A fragile situation, which could have worrying consequences for Europe”.

“Morocco suffers from a high unemployment rate among young people. This problem arises from access to secondary education, which is not universal, unlike primary education, which is now close to 100%. It also suffers “from a low proportion of women in the labor force, no doubt due to their importance in the informal sectors.”

Hakim El Karoui also notes structural rigidities, which persist and slow down the country's productivity, as well as rigidities in prices, wages and the labor market.

However, he praises the solidity of the Moroccan banking sector. “Bank Al-Maghrib has a good ability to control inflation, the consumer price index having never exceeded 2% in the 2010s, making it possible to stabilize the exchange rate, and to generate confidence foreign investors. The velocity of circulation of money fell sharply in the early 2000s, dropping from a ratio of 1.23 to 0.88 between 2001 and 2010, before stabilizing at 0.84 for a few years.

He adds: "despite the intrinsic weaknesses of its growth model, Morocco has been able to attract foreign capital and build a more robust financial system than its neighbors (Tunisia and Algeria, editor's note), making it possible to finance public investments and deficits currents”.

The Kingdom has also "demonstrated its ability to quickly mobilize a large number of financing tools, while giving priority to supporting fragile populations and managing the health emergency".

How to get out of the crisis ?

"Morocco needs deep structural reforms and must change its economic model to make it more wealth-creating and above all better distribute it," says the report.

The establishment of a poverty reduction plan is also necessary, as well as the improvement of productivity, through an investment plan oriented towards the secondary sector.

The financing of the modernization of the social protection and health system also presents itself as an essential project. "Despite the efforts made in recent years in the field of health, the health crisis linked to Covid-19 has shown the importance of initiating a profound reform of social protection in Morocco, aimed first and foremost at extending its benefits. ".

In terms of financing needs, this report projects scenarios with two objectives: the absorption of the surplus current and public deficits resulting from the crisis and the financing of an "additional" recovery plan, making it possible to make up for part of loss of income and investments. These projections are based on the latest macroeconomic scenarios produced by international financial institutions.

For Morocco, "according to the optimistic scenarios, the financing needs would be between 3.5 and 6.5 billion dollars, while they are between 6 and 11 billion dollars according to the pessimistic scenarios, if does not have aid from international donors". Nevertheless, the Kingdom "benefiting from an excellent relationship with international donors, based on political stability and the institutional capacity to implement major infrastructure projects, it is likely that donors will contribute significantly to a significant acceleration of the the country's investment effort.

Remember that the Institut Montaigne is a platform for reflection, proposals and experimentation, created in 2000 and dedicated to public policies in France and Europe.