Morocco: Country Economic Forecast: 20 Jan 2012

Elections in November saw the Justice and Development Party (PJD), a moderate Islamic party, winning the largest number of seats in the parliament. King Mohammed has appointed PJD leader Benkirane as premier, at the head of a four-party coalition. The PJD has promised greater democracy and will try to tackle inequality by raising the minimum wage, but it faces big challenges â?"unemployment remains high and recession in the EU, its main trade partner and largest source of tourists and remittances, will weigh on growth prospects. GDP growth picked up to 4.8% in Q3, with nine-month growth just over 4.5%. Although heavy state spending, on higher wages and subsidies, has supported domestic demand, exports and tourism will be hit by the sharp slowdown in the EU and growth is likely to decelerate. For 2012, we now forecast growth of 3.7%, down from an estimated 4.7% in 2011. Inflation remains generally subdued, helped by government subsidies, and is expected to have averaged 1% in 2011. The rate is likely to average 2.5% in 2012. The trade deficit rose by 25% to US$21bn last year as imports outpaced exports. And despite solid tourism revenues and workers' remittances, the current account deficit is estimated to have risen to 7.5% of GDP, up from just over 4% in 2010. The deficit is forecast to widen marginally this year, but could deteriorate more significantly if the grain harvest really disappoints.