Efforts by the Moroccan government to encourage export growth have become more important than ever amid predictions of challenging times ahead for emerging markets with large current account deficits. If successful, the kingdom?s ?Maroc Export Plus? strategy, which aims to triple exports to Dh327bn (?29.32bn) by 2018, will reduce dependence on foreign capital inflows and diversify its export base.
According to a recent report by Morgan Stanley, Morocco?s current account deficit thus far in 2013 is the third-highest in the world in percentage terms, at 7% of GDP, behind only Lebanon and Ukraine. The expected tapering of quantitative easing in the US will reduce the availability of dollars for foreign investment, leaving Morocco vulnerable to decreased capital inflows. Sustained growth in the export sectors, especially outside the phosphate and agricultural categories, would narrow the current account deficit and put Morocco?s economy in a stronger position.
Export initiatives
The state has rolled out several initiatives in support of Maroc Export Plus, including the ?Exports Growth Contracts? (Contrats de Croissance ? l’Export, CCE) programme. CCE offers direct financial support to companies selling goods overseas ? up to Dh5m (?450,000) for experienced exporters and Dh2m (?180,000) for start-ups. Firms that wish to participate must submit a business plan that identifies a new export product or target market. The government plans to invest Dh1bn (?90m) in up to 375 exporters over three years, with 25 applicants having signed up for the programme as of early August.
The kingdom has also been working to strengthen ties on a bilateral basis outside its traditional European partners, where demand growth has been slight in recent years. The ongoing Saudi-Moroccan Joint Commission for Bilateral Cooperation has formed a Dh800m (?71.73m) investment fund to boost trade opportunities. The two countries are also studying the creation of a direct shipping link that would link the ports of Tanger-Med, Rad?s and Jeddah. The total volume of trade between Saudi Arabia and Morocco was around ?3.3bn in 2012, although a large portion of this is comprised of Saudi Arabian oil exports to Morocco.
Recent results
According to the latest figures from the Office of Exchanges, exports of goods declined by 1% in the first seven months of the year, compared to the same period in 2012, to Dh108.1bn (?9.69bn). However, this modest decline was largely due to an 18.6% drop in the value of phosphate sales, the leading export product by value, due to lower global demand. Excluding phosphate, total exports of goods grew by 5.2%.
The details contained in the recent figures showed several bright spots. Aeronautic exports grew 28.7% through July 2013 compared to the first seven months of 2012, from Dh3.6bn (?320m) to Dh4.6bn (?410m). Although aeronautics make up just over 4% of exports, the sector has high potential in helping the country diversify from commodity exports towards advanced and high added-value production. Moreover, a strong aeronautical export sector is likely to have positive spillover effects in building skills and technical capacity. Morocco is aiming to double the size of the sector by 2020, a goal that appears feasible given expected strong global demand for new aircraft over the next 20 years.
Automobile exports also performed well in the first seven months of 2013, with overall growth of 16.6%, from Dh14.7bn (?1.2bn) to Dh17.1bn (?1.53bn) in the same period last year. Most of the growth was in automobile construction, where exports grew by 59%, from Dh3.8bn (?340m) to Dh6bn (?540m). Automobile wiring grew a more modest 1.9%, from Dh9.1bn (?820m) to Dh9.3bn (?830m).
Diversification of export base
The growth of historically smaller export sectors and the decline in the value of phosphate exports has translated into a moderately more diverse export base. In addition to the double-digit growth in the aeronautics and automobile sectors through July, pharmaceuticals exports grew by 8.6% (from Dh486m [?43.57m] to Dh528m [?47.34m]), and electronics by 9.4% (Dh4.2m [?380,000] to Dh4.6m [?410,000]). The second-largest export category, agriculture and food, grew by 7.7% (from Dh1.9bn [?170m] to Dh2.07bn [?190m]). As a result, phosphate?s share of total exports has declined to 21.4% through July, from 26.1% the previous year. Automobile exports now account for 15.9% of exports, an increased share of 2.4 percentage points, and aeronautics has grown from 3.3% to 4.3%.
Nonetheless, Morocco remains overly dependent on commodity exports, including phosphates and agricultural products, which make up more than 40% of overseas sales. This leaves the economy vulnerable to fluctuations in global demand and commodity prices. Sustained efforts to diversify the export base will remain important in the near-term, and the government can be expected to continue to focus on automobiles and aeronautics as particularly promising areas for high-value growth.
