Morocco’s GDP forecast downgraded after quake

Reuters/Emilie Madi

• GDP set to grow by 1.8% this year
• 3,000-plus people killed in quake
• Bulk of reconstruction expected in 2024

Analysts have downgraded growth forecasts for Morocco in the wake of the deadly earthquake on September 8.

More than 3,000 people were killed and many more are still missing. Homes and infrastructure in the Al Haouz province, southwest of the High Atlas mountains, were severely damaged.

The disaster has prompted analysts at BMI, formerly Fitch Solutions, to cut GDP growth expectations for this year from 2.4 percent to 1.8 percent.

BMI expects the earthquake to disrupt economic activity and decrease tourist inflows, but said the impact on the country’s headline growth would be “relatively moderate” given that the worst-affected areas are remote mountainous terrain that contribute about a fifth of the nation’s GDP.

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The Moroccan government convened last week to make plans for reconstruction, but did not release any details about the fiscal response. 

Public spending is expected to increase, but analysts believe this will not be enough to counterbalance the negative impacts of the earthquake.  

“The significant extent of the damage and the government’s constrained ability to significantly ramp up investment in the near term mean that reconstruction efforts will be slow, with the bulk occurring in 2024,” BMI said in a research note.

As a result, the research firm has revised up its GDP growth forecast for 2024: from 2.8 percent to 3.1 percent.

Reuters/Ammar Awad

BMI analysts also believe Bank Al Maghrib, the country’s central bank, will adopt a more cautious approach to interest rates at its next meeting. The bank is tipped to hold its rate at 3 percent until March 2024.

The damage to key tourist sites is expected to discourage international travellers, compounding the negative economic effects. More than 25 historic sites were significantly damaged in the quake. While these sites have not been destroyed, their restoration will take years. 

“We think this will act as a disincentive to tourist inflows to areas affected by the earthquake, especially to the tourist city of Marrakesh which has been damaged,” BMI said.

Marrakesh accounted for 42 percent of nights spent at hotels in Morocco in the first half of 2023. 

Morocco’s fiscal deficit was expected to widen from 5.2 percent of GDP in 2022 to 5.8 percent this year. This is well up on the 10-year pre-pandemic average of 4.4 percent and had been attributed to higher capital spending – which is now set to increase even further.

BMI said the government could redirect funds earmarked for investment projects to reconstruction, without putting significant pressure on public finances. 

Authorities could also choose to tap into the $5 billion granted as part of the International Monetary Fund’s flexible credit line, which could galvanise financing to fund reconstruction efforts.

As of September 12, Morocco has received about $1.1 billion in humanitarian support from the European Union as well as donations from other countries.

Speaking before the earthquake, economists told AGBI earlier this month that they were “optimistic” about the outlook for Morocco.