The nation’s independent central bank has set the foundations for a first-class modern financial system that is accelerating economic growth

Co-operation with the private sector is one of the fundamental pillars of the central bank’s success in spurring economic activity.

ccording to data provided by Bank Al Maghrib, Morocco’s central bank, the national economy has been growing at an annual average rate of 4.9 percent since 2000 in real terms, in contrast to the previous decade, it is less susceptible to agricultural production results. Increased internal demand, both for consumer goods and investment, added to a new-found dynamism in exports, have helped to produce this surge. Employment figures are also on the up, with an 8 percent rise in 2006 creating 300,000 new jobs.

“The current macroeconomic framework is sustainable and makes it possible to be optimistic in the medium-term,” says Abdellatif Jouarhi, Governor of Bank Al-Maghrib. “Growth has consolidated over the past few years with non-agricultural GDP higher than 4 percent on average during the last five years. For the current year, in spite of lower agricultural yields, the growth rate will be about 3 percent. Prospects for 2008 will be marked by a continued upward trend in domestic demand and capital expenditures.”

Thanks to its independent state and by means of the judicial application of regulations, the central bank has taken action to consolidate the stability and performance of the banking environment, helping to create a healthy and powerful financial system, promoting investment, mobilising resources and integrating the national economy to the world economy.

“The ongoing process of reorganization and modernization has made it possible to equip the Moroccan banking structure with a solid base which consolidates its competitiveness. It is a fully competing market, as evidenced in the lowering of interest rates and the increasing amounts of financial products and services available,” explains Mr. Jouarhi. Banking sector performance has been showing clear improvement and profitability, under the combined effect of a surge in activity and a diversification in income sources, stemming from a rise in commissions margins and increased market operations. “The control of overheads, the fall of the operating ratio and the fall of the cost of risk have also contributed to the improvement of the results,” he adds. Recruitment is also on the rise: the banking sector currently employs 0.25 percent of the working population. And as a result of the improvement to the financial base of banks, investment in technological advances and financial innovations has also shown growth, completing the circle in creating a safer, more stable environment.

ABDELLATIF JOUARHI Governor of Bank Al-Maghrib

While ongoing reforms are helping to modernize the Moroccan financial sector and integrate it to world systems, more needs to be done, especially to continue to attract foreign investment, one of the main engines of economic growth.

“The fall of the rate of inflation in Morocco has made it possible to ensure the stability of the exchange rate of the dirham in real terms, which is likely to increase foreign investor confidence,” says the governor. Maintaining price stability is one of the bank’s fundamental objectives, thus helping to achieve government objectives of growth acceleration and poverty reduction.

The banking sector has been noting a marked increase in requirements for products and services geared towards SMEs and households. Co-operation with the private sector is one of the central bank’s original directives. In order to better gauge the requirements of the industrial sector, it has introduced a new data-retrieval system where information provided by industry will help to improve decision-making on monetary policy. The bank has also organized, in collaboration with other partners, a kingdom-wide public awareness campaign for the promotion of SMEs, under the banner: ‘For a better partnership between banks and SMEs, to the service of human development’. By introducing measures to improve transparency in companies, the central bank has created a safer environment for credit institutions, decreasing the risk of lending.

Relations with the United States, particularly on the political side, are strong. The creation of a free trade agreement (FTA) between the two countries has helped to increase commercial relations. Despite this, Mr. Jouarhi believes that there is still great potential for growth in economic exchanges between the U.S. and Morocco.
“The United States is the fifth customer of Morocco and its eighth supplier. Since the FTA entered into force, trade has gone up to $1,396.8 million, an increase of 44 percent. Moroccan exports reached $521.2 million (up 17 percent), while Moroccan imports amounted to $875.5 million (a rise of 67 percent),” says the governor.

“There are more than 120 American companies currently doing business in Morocco, involving an investment of more than $850 million,” he adds. “Their activities cover a broad range of sectors from telecoms to pharmaceutical products and other high-consumption consumer goods. With regard more particularly to American operators, the FTA contains important guarantees. It provides a stable legal framework securely covering all forms of investment, including FDI, concessions of public services, and intellectual property. American investors are placed on equal footing with national operators. This agreement enables them, moreover, to profit from the Morocco-EU agreement by making our country a platform for their activities.”

A newly emerging sector which U.S. businesses and investors could enter to maximum benefit is tourism. Liberalization of air transport on the one hand will help to increase tourism figures, while plans to develop resort areas offer great potential to investors, according to the governor.