MAJOR MACRO ECONOMIC INDICATORS
|2016||2017||2018 (e)||2019 (f)|
|GDP growth (%)||1.2||4.3||3.1||3.3|
|Inflation (yearly average, %)||1.8||1.6||1.0||1.6|
|Budget balance (% GDP)||-4.3||-3.4||-3.9||-3.8|
|Current account balance (% GDP)||-4.5||-3.7||-4.3||-4.0|
|Public debt (% GDP)||81.6||82.0||82.6||82.9|
(e): Estimate. (f): Forecast.
- Favourable geographical position, close to the European market
- Strategy to move to high-end market and diversify industrial production
- Political stability and commitment to reform
- Growing integration in African market
- Economy highly dependent on the performance of the agricultural sector
- Significant social and regional disparities. Although decreasing, the poverty rate remains high.
- Weak productivity and low competitiveness
- High unemployment and low female participation in the labour market
- Political tension with regional neighbours
A marked deceleration in the pace of growth in 2019
Despite the decline in agricultural GDP, Moroccan growth firmed in 2018 on the back of a favourable external environment. The non-agricultural sector grew at a lively pace, supported by the solid performance of the manufacturing sector and continued momentum in domestic demand. While the automotive sector continues to benefit from increased registrations in Europe, the construction sector is marking time. In 2019, growth is expected to increase slightly thanks to an rise in agricultural GDP. Indeed, the heavy rainfall suggests a promising 2018/2019 agricultural season. Value added growth in the secondary and tertiary sectors should continue to drive activity, supported by robust domestic demand and resilient exports despite muted European growth. Meanwhile, favourable domestic prospects and tax incentives are expected to boost private investment and offset the decline in public investment in 2019. Inflation is set to remain moderate, but rising energy prices are likely to affect both household purchasing power and business competitiveness.
Further fiscal consolidation
Initially forecast at 3% of GDP, the government deficit rose slightly in 2018. A smaller-than-expected increase in revenues has diverted the path of public finances. Although fiscal consolidation efforts initiated in 2013enabled the deficit to gradually stabilise, the government intends to raise expenditure in 2019 to cope with an economic environment that is expected to present risks. Public investment in major projects is likely to continue but should be streamlined. New hires in the Ministries of Defence and the Interior will increase the weight of the wage bill. At the same time, the focus on social spending on health and education should result in increased allocations to the relevant ministries. Higher oil prices would also increase the subsidy burden, which is estimated at 1.3% of GDP. Expenditure is to be partly financed by tax hikes (tobacco, corporation tax) and privatisations. This worries credit rating agencies, and in October 2018, S&P revised the outlook for the country's sovereign rating from stable to negative while warning the authorities that a downgrade was possible if fiscal imbalances increase. Morocco could move into the speculative category, which would push up the cost of debt as the country returns to the international market.
Turning to the external accounts, a favourable phosphate market, resilient automotive and aerospace exports, and rising tourism revenues should partially offset higher energy costs in 2019. The current account deficit is expected to be slightly reduced. Foreign exchange reserves will remain comfortable. The country's low exposure to international capital markets should also protect it from capital flow volatility. Nevertheless, Morocco has requested a new precautionary line from the IMF.
Rising social risk
The coalition resulting from the 2016 parliamentary elections and led by the Justice and Development Party (PJD) looks shaky. While relations between the Islamist party, which won the elections, and the National Rally of Independents (RNI) have eased somewhat, there was a flare-up with the Party of Progress and Socialism (PPS) in October 2018. At the same time, divisions are emerging within the PJD itself, whose militant youth movement is increasingly at odds with the political line adopted by the government. Prime Minister Saâdeddine El Othmani remains under fire from critics in the opposition, the palace and the population. He is being challenged on his management of several big issues (boycott of several major Moroccan groups, time change, and a rail accident) and is beginning to suffer from a lack of credibility. In response to mounting social unrest, the 2019 budget provides for a spending shift to allocate more resources to health and education. At the same time, Prime Minister Othmani has committed himself to pushing on with several unpopular reforms, such as increasing taxes on property capital gains and regulating road transport.
Last update : February 2019
Bank transfers are becoming the most popular means of payment for both domestic and international transactions. 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, instalment, 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.
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 instalments, 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.
Morocco has a dual legal system that consists of secular courts based on French legal tradition and courts based on Islamic traditions. 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.
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.
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 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).
The alert procedure is initiated by a business’ partners or auditors (external auditors hired by the company to rectify the financial situation), who are required to notify the company manager of any opportunities to redress the situation within eight days. If no steps are taken to remedy the situation within 15 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.
This is a heavy mechanism, intended to allow a company to reorganize in order to continue to survive. To benefit from it, the company must establish that it is not in a state of cessation of payments. However, in the context of this procedure, it is still possible to negotiate with your creditors, in order to avoid arriving at to this cessation of payments, to the receivership proceedings. It is the company that seizes the court, which pronounces a judgment of opening of the safeguard procedure. The procedure starts with a six-month observation period (renewable once) during which the insolvency administrator, in collaboration with the manager, draws up a “economic and social balance sheet” (BES) for the company: an update on the origin of the difficulties, he current financial situation, the corrective measures to be envisaged and the resulting prospects. During this period, the company takes appropriate measures to correct the situation, and it helps the administrator to develop a backup plan. The adoption of such a plan by the court marks the end of the observation period and the beginning of the actual plan, which can last up to five years. Here again, the manager remains master aboard his company but, above all, the company will benefit from radical measures that the court can only impose:
- suspension of maturities of debts;
- stop individual prosecutions;
- obligation for all creditors to declare their claims;
- stop interest rate.
This procedure is only available for debtors that have become insolvent (état de cessation de paiements), 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 company 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 reorganisation 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.
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, 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.