Economic studies
Morocco

Morocco

Population 34.5 million
GDP per capita 3004 US$
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Synthesis

MAJOR MACRO ECONOMIC INDICATORS

  2015 2016 2017(f) 2018(f)
GDP growth (%) 4.5 1.2 4.3 2.9
Inflation (yearly average, %) 1.8 1.6 1.0 1.6
Budget balance (% GDP) -4.2 -4.0 -3.8 -3.5
Current account balance (% GDP) -3.1 -4.3 -3.9 -5.3
Public debt (% GDP) 63.7 64.7 64.9 65.3

(f): forecast

STRENGTHS

  • Favourable geographic position, close to the European market
  • Strategy to move to high-end market and diversify industrial production
  • Political stability and commitment to reforms
  • Growing integration in African market

WEAKNESSES

  • Economy very dependent on performances in the agricultural sector
  • Significant social and regional disparities. Although falling, the poverty rate remains high
  • Weak productivity and low competitiveness
  • High unemployment rate and low female participation in the labour market
  • Political tensions with regional neighbours

RISK ASSESSMENT

Slight downturn in 2018

Growth in Morocco is correlated to that of the agricultural sector, which, although on a trend towards greater diversification, is still concentrated around cereal production, which is sensitive to weather conditions. 2016, characterised by a period of drought, was followed in 2017 by heavy rains pushing agricultural GDP up by 15.1% and total GDP up by more than 4%. From a sector perspective, manufacturing industries continued their upturn begun in 2016, as has the services sector, buoyed by the recovery in tourism. Construction is still on a downward trend, evidence of the downturn in the residential property market since 2016. In 2018, growth is likely to be more muted mainly because of the underlying effect associated with a slowdown in agricultural GDP growth. However, the economy, excluding agriculture, is expected to continue perform well, buoyed by still resilient internal demand. Household consumption, although benefiting from moderate inflation, will be slightly penalised by falling agricultural incomes. Investment is expected to remain firm, thanks to the ongoing pursuit of an expansionary public investment policy based on major projects, chiefly oriented towards port projects (Tanger-Med 2, the Nador West-Med port complex) and robust private investment encouraged by a policy of tax incentives (exemption from registration fees for new businesses, lower tax rates on certain sectors). Exports, on the way up in 2017, are expected to continue the same positive trend in 2018 with recovery consolidating in the markets of the Kingdom’s main trading partners.

 

Ongoing fiscal consolidation

The fiscal consolidation begun in 2013 has led to a gradual stabilisation of the public deficit. Rising internal demand pushed up revenues from indirect taxes, particularly VAT, and from direct taxes. Spending remained contained, despite there being no government from November 2016 to April 2017. In 2018, public spending is likely to edge upwards, boosted by an increased investment drive by public-sector companies, but also by higher operating expenditure associated with the rise in the number of civil servants in the national education system. Financed primarily on the domestic market on preferential terms, the public debt is expected to remain stable in 2018, so debt interest payments look set to remain moderate.

The deepening trade deficit puts pressure on the external accounts. The combination of temporary factors like the increase in purchases of capital goods associated with infrastructure projects and the higher energy bill resulting from the rebound in the oil market has pushed imports higher. However, this increase obscures the dynamism of agri-food, automotive, and aeronautical exports. Phosphate sales have also risen, driven by increased demand from emerging markets despite a fall in world prices. In 2018, firm oil prices will continue to adversely affect the cost of imports, but to a lesser extent than in 2017, while the expected increase in investment will continue to sustain imports of capital goods. In contrast to 2017, the growth in remittances from expatriate workers driven by more favourable economic conditions in European countries, improved tourism income and higher FDIs will help consolidate foreign exchange reserves at a satisfactory level of just over five months of imports. Following the announcement of a move to a floating exchange rate, these reserves came under downward pressure from the massive purchase of hedging products by domestic economic players and from central bank interventions aimed at stabilising the dirham’s exchange rate. The reform, which is intended to result in greater flexibility for the dirham, has been postponed to a later date.

 

Increased social risk

Although he won the 2016 parliamentary elections, the leader of the JDP (Justice and Development Party), Abdelilah Benkiran, failed to capitalise on his victory in the polls by building a coalition able to form a government. After 5 months of impasse, a new prime minister, also from within the ranks of the JDP was appointed by King Mohammed VI to replace him. Saâdeddine El Othmani took up his post as head of the government in April 2017, after concluding an agreement with five other parties. Among the challenges the new government will face is the uprising affecting the landlocked regions in northern Morocco. The Hirak movement is campaigning for greater social justice and action to address the regional disparities penalising the Rif region. Street demonstrations intensified in July 2017 following the arrest of the movement’s main leaders now facing serious charges. The police response was not the only response by the Moroccan authorities. In October 2017, King Mohamed VI announced the sacking of several ministers and secretaries of state. This reshuffle came after several speeches by the king strongly denouncing the administration’s ineffectiveness and its inability to meet the demands of its citizens. Morocco is strengthening its economic and political presence on Africa by becoming a key player in the region after its reintegration into the African Union on the 30th January 2017, as well as its accession to ECOWAS.

 

Last update : January 2018

Payment

 

Cheques are still commonly used as instrument of payment and also constitute efficient debt recognition titles: debtors may be prosecuted if they fail to pay the amount owed. Bills of exchange also constitute an attractive means of payment, because they are a source of short-term financing by means of discounting, installment, or transfer.

 

Promissory notes are used to record the financial details of personal debts, business debts and real estate transactions. They are legally binding contracts that can be used in a court of law if the debtor defaults. A promissory note acts as solid evidence of an agreed payment, and subsequently debt in case of dispute.

 

Nevertheless, bank transfers are becoming the most popular means of payment for both domestic and international transactions.

 

Debt collection

Amicable phase

Debt collection must begin with an attempt to reach an amicable settlement. Creditors attempt to contact their debtors through different means (telephone calls, written reminders such as formal letters, emails or extrajudicial notifications, etc.). Amicable settlement negotiations can be intense, and cover aspects such as the number of payment installments, write-offs, guarantees/collateral, and grace period interest. Moroccan law states that a lawyer can acknowledge the signature of the debtor via payment plans, which are signed, certified, and legalized by the competent authorities in Morocco. The creditors’ lawyer can subsequently use this payment agreement as debt recognition in case of legal action.

 

Legal proceedings

Morocco has a dual legal system that consists of secular courts based on French legal tradition and courts based on Islamic traditions. The appointments in brackets are written in French because they are the own appointments of different courts in Morocco.

 

Secular courts includes proximity courts (juridictions de proximité) in charge of settling disputes between individuals, Courts of First Instance (tribunaux de première instance) dealing with all civil matters, Commercial Courts dealing with business disputes, Appellate Courts (Cours d’Appel) dealing with civil and administrative matters, and a Court of Cassation (Cour de Cassation).

 

There are 27 Sadad Courts, which are courts of first instance for Muslim and Jewish personal law.

 

Fast-track proceedings

The order to pay is available when the debt has a contractual cause or the obligation is of a statutory origin. It is characterized by a petition form sent to the relevant clerk of the court. The debt must be certain, liquid (i.e. clean and clear), due, and uncontested. An enforceable order to pay is obtained within an average delivery time of six months, unless the defendant lodges an opposition against the ruling. In the defendant opposes the order within one month of being served, the case is referred to ordinary proceedings.

 

Ordinary proceedings

A writ of summons is sent by the creditor’s representative to the relevant court and served by a bailiff to the debtor, who may subsequently obtain legal representation in the period prescribed by the judge and file a counter claim. Several hearings may be required for the exchange of written submissions, transmissions of documents and to produce the relevant evidence.

 

The main hearing is set by the judge to hear the presentation of the pleadings. Discussions and pleadings are conducted by the judge during the public hearing. The case is then taken under deliberation to allow judges to discuss the means, grounds, and pronouncement that make up the content of the judgment. After the sitting of the judgers, a reasoned judgment is rendered. It can usually be obtained within an average delivery time of one year.

 

Enforcement of a court decision

Once all appeal venues have been exhausted, a judgment becomes final and enforceable. Garnishee orders are normally efficient for seizing and selling the debtor’s assets.

 

According to Moroccan law, commercial courts are obliged to recognize judgments rendered abroad, even if there is no convention signed for this purposes with the issuing country. In order to be recognized and enforced, the original copy of the foreign judgment must be provided to the court with a certificate of non-appeal.

 

When a foreigner gets final judgment that they want to enforce in Morocco and, if not, when seeking enforcement of a Moroccan judgment abroad, they must follow exequatur proceedings.

There are two enforcement procedures. The first is uniquely Moroccan, whereas the second is fixed by judicial bilateral agreement between Morocco and other countries, including Germany, Belgium, the United States of America, the United Arab Emirates, Spain, France, Italy and Libya

 

Insolvency proceedings

Insolvency proceedings are regulated by Book V of the Commercial Code. It provides for prevention of difficulties (alert procedure and amicable settlement procedure) as well as formal insolvency procedures (judicial rehabilitation proceedings and judicial liquidation proceedings).

 

Alert procedure

Businesses are compelled to work towards the internal prevention of their financial difficulties and recovery with the aim of maintaining their activity. The alert procedure is initiated by a business’ auditors or partners (external auditors hired by the company to rectify the financial situation), who are required to notify the manager of the business of any opportunities to redress the situation within eight days. If no steps are taken to remedy the situation within fifteen days, a general assembly must be convened to take a decision on how to redress the situation based on the auditor’s report.

 

Amicable settlement procedure

Amicable settlement procedures can only be implemented by a commercial company, trader, or artisan, who is experiencing financial difficulties but is not yet cash flow insolvent. Once initiated, the debtor is placed under the supervision of the Court. The Court subsequently appoints an external mediator for a limited period of three months to assist the debtor in reaching an agreement with its creditors. A settlement can be reached with all creditors or the debtor’s “main creditors”. Creditors are entitled to their entire claim, but the mediator may propose an arrangement or creditors may assign a portion of the debt if they so wish. Once approved by the Court, all judicial proceedings relating to debts covered by the agreement are suspended for the duration of the amicable settlement agreement.   

 

Judicial rehabilitation proceedings

This insolvency procedure is only available for debtors that have become insolvent (état de cessation de paiement), but whose financial situation is not irreparably compromised. An insolvency judge and an office holder (the person appointed by the court as part of an insolvency or liquidation; also acts as the syndicate) are appointed by the court. During the process, the debtor and its management remain in possession of the company’s assets and the debtor continues its business. The rehabilitation procedure can result in either the reorganization of the debtor’s business or its liquidation. The office holder is required to prepare a report on the situation of the company within four months from the opening of the proceedings. In his report, the office holder will either recommend a rehabilitation plan for the debtor, the sale of the business, or liquidation. The court is then required to reach a decision on the fate of the debtor, based on the report. There is no direct vote by the creditors on the options available to the debtor during the procedure.

 

Judicial liquidation proceedings

The judgment initiating the procedure makes all the debts immediately due and payable, the creditors within a period of two months must present their claims. Moroccan creditors have two months to submit their declarations; creditors residing abroad have a period of four months. Liquidation proceedings may terminate prematurely before a distribution in liquidation if:

  • the debtor has no more debt, or
  • the office holder has sufficient funds to pay all the creditors in their entirety, or
  • the debtor does not have enough assets to cover the costs of the liquidation procedure.

Under Moroccan law, there are no specific rules on the priority of claims in the event of insolvency. Nevertheless, there are some privileged creditors such as: the employees, the public treasury, the social agencies, the creditors of a collective conciliation, finally the unsecured creditors. 

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