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Morocco Braces for Lowest Growth This Century on Virus, Drought

Morocco Braces for Lowest Growth This Century on Virus, Drought

(Bloomberg) -- Morocco’s economy faces the prospect of its worst growth rate in two decades as a drought takes its toll and the global coronavirus outbreak batters the vital tourism sector in the region’s only investment grade sovereign.

The warning by Ahmed Lahlimi, who heads the country’s planning agency, comes as the North African kingdom is struggling to revive its economy and boost employment to stave off the unrest that gripped neighboring Algeria and Tunisia.

“The skies have not been very generous this year,” Lahlimi said in a phone interview, referring to poor rainfall. The agency plans to cuts its growth forecast for 2020 by as much as a third, to 2.2% or 2.3%, “as we continue to assess a rapidly evolving situation,” he said.

The agency had earlier projected GDP growth of 3.5% this year while the International Monetary Fund, which has urged Morocco to press ahead with currency reform, had estimated 3.7%. Current conditions, though, “suggest we are on course for the lowest growth in two decades,” Lahlimi said.

The coronavirus outbreak, which has wreaked havoc on global markets, poses a huge challenge for the country that’s heavily dependent on tourism from Europe. At the same time, a drought has battered crops and helped push growth to a three-year low, in a slide exacerbated by dwindling support from Gulf Arab monarchies and weak demand in the European export market.

In a bid to ease the effects, authorities announced earlier this month they would double the currency trading band -- a step that’s part of what officials said was a foreign-exchange rate reform program.

“It will absorb potential shocks,” Lahlimi said of the currency reform move. “The structural problem is that we still need to import a lot whether in order to consumer or to produce and re-export”.

The prospects of a pick up in demand on Moroccan goods and services especially from the key European Union market is “dimming.”

To contact the reporter on this story: Souhail Karam in Rabat at skaram10@bloomberg.net

To contact the editors responsible for this story: Nayla Razzouk at nrazzouk2@bloomberg.net, Tarek El-Tablawy, Michael Gunn

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