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Morocco: Market Profile

Picture: Morocco factsheet
Picture: Morocco factsheet

1. Overview

Following a slowdown in 2016, the country’s real GDP growth rate bounced back and reached 4% y-o-y in 2017. The agricultural sector has experienced a strong recovery. However, non-agricultural GDP remained sluggish at around 2.8% y-o-y. Over the medium term, Morocco’s economic outlook should improve, provided the government remains committed to implementing deep and comprehensive reforms. The outlook remains linked to continued fiscal consolidation, a flexibly managed exchange rate regime and the implementation of structural reforms in key areas, such as education and the labour market, in order to reduce unemployment (especially among the young), improve the business environment and enhance human capital.

Source: HKTDC, Fitch Solutions

2. Major Economic/Political Events and Upcoming Elections

October 2016
Parliamentary elections. King picked Abdelilah Benkirane for a second term as prime minister after his party won the most seats.

March 2017
King Mohammed dismissed Abdelilah Benkirane from his post as Prime Minister, due to his failure to form a coalition government. King chose former PDJ secretary-general Saad-Eddine El Othmani as his successor.

Source: BBC country profile – Timeline

3. Major Economic Indicators

Graph: Morocco real GDP and inflation
Graph: Morocco real GDP and inflation
Graph: Morocco GDP by sector (2017)
Graph: Morocco GDP by sector (2017)
Graph: Morocco unemployment rate
Graph: Morocco unemployment rate
Graph: Morocco current account balance
Graph: Morocco current account balance

e = estimate, f = forecast
Sources: International Monetary Fund, World Bank, Fitch Solutions
Date last reviewed: August 21, 2018

4. External Trade

4.1 Merchandise Trade

Graph: Morocco merchandise trade
Graph: Morocco merchandise trade

Source: WTO
Date last reviewed: August 21, 2018

Graph: Morocco major export commodities (2017)
Graph: Morocco major export commodities (2017)
Graph: Morocco major export markets (2017)
Graph: Morocco major export markets (2017)
Graph: Morocco major import commodities (2017)
Graph: Morocco major import commodities (2017)
Graph: Morocco major import markets (2017)
Graph: Morocco major import markets (2017)

Source: Trade Map, Fitch Solutions
Date last reviewed: September 20, 2018

4.2 Trade in Services

Graph: Morocco trade in services
Graph: Morocco trade in services

Source: WTO
Date last reviewed: August 21, 2018

5. Trade Policies

  • The Moroccan government's commitment to expanding international trade and striking further free trade agreements has seen a reduction in tariff and non-tariff barriers.

  • The weighted average import tariff in Morocco, at 3% in 2015, is among the lowest in the MENA region, indicating lower-cost imports for both businesses and consumers and boosting the country's appeal as an investment destination. Higher MFN tariffs are applicable to some items, particularly agricultural products and clothing, but generally businesses benefit from competitive trade tariffs.

  • The customs process can be somewhat slow and burdensome, with bureaucracy remaining a barrier to trade, but generally documentary and customs compliance is more efficient than in other MENA states. Other non-tariff barriers such as inspections and onerous quality standards pose minimal obstacles.

  • The government imposes a restriction on prepayment for import orders at a maximum of 30% of the total cost, in order to manage foreign currency outflows. This leaves businesses reliant on trade financing such as letters of credit, which can prove costly and pose a potential barrier to trade.

Source: WTO - Trade Policy Review, Fitch Solutions

6. Trade Agreement

6.1 Trade Updates

Morocco re-joined the African Union (AU) in January 2017. Its application in June 2017 to join the Economic Community of West African States (ECOWAS) has also been accepted by the latter organisation.

6.2 Multinational Trade Agreements

Active

  • Morocco-US: the Free Trade Agreement (FTA) agreement came into force in January 2006. The US is a trading partner of Morocco's and this agreement has resulted in Morocco reducing its tariffs on imports from the US.

  • Tunisia, Egypt, Jordan, Morocco: While none of these countries are within the top five exporting or importing partners of Morocco, it does serve to encourage inter-regional trade in the MENA region.

  • Morocco-Turkey: the FTA agreement came into force in January 2006.

  • Agadir Agreement: the FTA came into force in March 2007. The signatories are, Egypt, Jordan, Morocco and Tunisia.

  • European Free Trade Association (EFTA)-Morocco: the FTA came into force in December 1999 and includes Iceland, Liechtenstein, Norway, Switzerland and Morocco.

  • EU-Morocco: the FTA came into force in March 2000.

  • Global System of Trade Preferences among Developing Countries (GSTP): the partial scope agreement came into force in April 1989.

  • Pan-Arab Free Trade Area (PAFTA) - the FTA came into force in January 1998.

Under Negotiation

  • Association Agreement with the EU: The EU accounts for around 60% of Morocco's exports, and, therefore, trade flows are further encouraged.

Source: WTO Regional Trade Agreements database, Fitch Solutions

7. Investment Policy

7.1 Foreign Direct Investment

Graph: Morocco FDI stock
Graph: Morocco FDI stock
Graph: Morocco FDI flow
Graph: Morocco FDI flow

Source: UNCTAD
Date last reviewed: August 21, 2018

7.2 Foreign Direct Investment Policy

  1. FDI in Morocco is welcomed into a wide range of sectors, and has, traditionally, been channelled into sectors, such as textiles manufacturing, autos, real estate, finance and tourism. Recent investment announcements have included renewable energy projects (notably the world's largest concentrated solar power plant), as well as autos production plants and port expansion.

  2. Morocco's openness to FDI means that foreign investors come up against few regulatory or policy obstacles when entering the country's market. Most sectors have no restrictions on foreign ownership and there is no mechanism for mandatory government screening of approval of projects. The only meaningful barriers to foreign investment concern caps on foreign involvement in air and maritime transport and fisheries, and the presence of state-owned enterprises (SOEs) which limit private sector activity in some sectors, notably phosphate mining. In general, these barriers do not pose a major concern for foreign investors in Morocco, and the government's favourable attitude towards FDI means that investor sentiment is little affected by them.

  3. Foreign ownership restrictions: Foreign participation in companies in the air and maritime transport and maritime fishery sectors is capped at 49%. Foreign ownership of agricultural land outright is not permitted, though leases of up to 99 years are available. The government has a monopoly on the phosphate mining industry through the 95% state-owned Office Chérifien des Phosphates, restricting foreign participation to downstream industries, such as fertiliser production.

  4. SOEs: SOEs continue to operate in some sectors of the economy, notably phosphate mining. While this precludes foreign involvement in these industries, SOEs do not significantly distort the playing field against foreign or private firms in most sectors.

Sources: WTO - Trade Policy Review, Government Sources

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
4 FTZs available across the country, including: Tangier, Fes, Casablanca, Marrakech, Agadir, LaayounBusinesses’ operations in these areas enjoy the following:
- Exemption from customs regulations
- Exemption from foreign exchange controls
- Exemption from taxes and tariffs paid on goods entering and leaving the zone
- Corporate income tax holiday for 5 years
- Reduced corporate income tax rate of 8.75% applicable after the fifth year, for a maximum of 20 years
Casablanca Finance CityBusinesses’ operations in these areas enjoy the following:
- Reduced corporate income tax rate of 8.75%, rising to 10% after the first five years
Investment Charter IncentivesQualifying businesses enjoy the following:
- Corporate income tax holiday for 5 years for exporting companies
- Reduced corporate income tax rate of 17.5% applicable after the fifth year
- Investment aid of 30% of the cost of commercial premises, and 15% of new capital goods, up to a maximum of 15% of project value or MAD30 million

Sources: US Department of Commerce, Fitch Solutions

8. Taxation – 2018

  • Value Added Tax: 20%
  • Corporate Income Tax: 10%-37%

Source: PwC Tax Summaries 2018

8.1 Important Updates to Taxation Information

  • Starting January 1, 2018, Moroccan corporate income tax (CIT) is levied using a progressive rate scale (instead of a proportional rate scale). Credit institutions and insurance companies remain subject to a flat CIT rate of 37%.
  • Starting January 1, 2018, the capital gains on non-depreciable assets recorded following a merger/demerger operation cannot be offset against available losses.
  • Starting January 1, 2018, absorbing companies are allowed to carry forward the amortisation loss onto the following fiscal years.

8.2 Business Taxes

Type of TaxTax Rate and Base
Corporate Income Tax- 10% on income below MAD300,000
- 20% on income between MAD300,001 - 1,000,000
- 30% on income between MAD1,000,001 - 5,000,000
- 31% on income above MAD5,000,001
- 37% on leasing companies and credit institutions
Branch Tax15% on after tax profits of branch offices
Withholding Tax- 15% on dividends paid to non-residents
- 10-30% on interest
- 10% on royalties
Professional Tax10%-30% on the rental value of business premises
Social security contributions- 6.4% family allocation on gross salaries
- 8.6% social allocation on salaries up to MAD6,000
- 1.6% professional tax on gross salaries
- 4.11% mandatory medical care on gross salaries
VAT20% standard rate on sale of goods and services

Source: PwC Tax Summaries 2018
Date last reviewed: September 18, 2018

9. Foreign Worker Requirements

9.1 Foreign Worker Permits

Companies wishing to employ foreign workers in Morocco for more skilled positions must apply for work permits (attestation de travail) from the National Agency for the Promotion and Employment of Skills (Agence Nationale de Promotion de l'Emploi et des Compétences).

Required documents to obtain a permit are relatively standard: employment contract, copies of degrees, copies of passport and application form. The process is free, but can take several weeks and the Moroccan bureaucracy can be complicated to navigate for foreigners.

9.2 Visa/Travel Restrictions

Citizens from 68 countries (including many European and MENA countries, but not Algeria) do not need visas for stays up to 90 days. Foreigners from countries that require a visa to enter Morocco as visitors must apply in person at the Moroccan consular post where they currently reside. Business visas for 90-day stays cost USD27.00 for one entry and USD40.50 for two entries.

Source: Government websites, Fitch Solutions

10. Risks

10.1 Sovereign Credit Ratings


Rating (Outlook)Rating Date
Moody's
Ba1 (Positive)24/02/2017
Standard & Poor'sBBB- (Stable)15/11/2013
Fitch Ratings
BBB- (Stable)29/03/2018

Sources: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators


World Ranking
201620172018
Ease of Doing Business Index
68/18968/19069/190
Ease of Paying Taxes Index
62/18941/19025/190
Logistics Performance Index
86/160N/A109/160
Corruption Perception Index
90/17681/180N/A
IMD World CompetitivenessN/AN/AN/A

Sources: World Bank, IMD, Transparency International

10.3 Fitch Solutions Risk Indices


World ranking
201620172018
Economic Risk Index Rank96/202
Short-Term Economic Risk Score50.451.348.3
Long-Term Economic Risk Score52.253.152.4
Political Risk Index Rank70/202
Short-Term Political Risk Score64.267.967.9
Long-Term Political Risk Score68.569.969.9
Operational Risk Index Rank83/201
Operational Risk Score50.852.552.9

Source: Fitch Solutions
Date last reviewed: August 21, 2018

10.4 Fitch Solutions Risk Summary

ECONOMIC RISK
High trade exposure to the Eurozone markets poses a medium-term risk to Morocco's growth. Approximately two-thirds of the country's goods exports are absorbed by its northern neighbours. As a consequence, the export sector is highly vulnerable to any economic downturn in the Eurozone, particularly in light of global trade tensions and risks stemming from the UK's planned separation from the EU. The tourism industry also relies extensively on visitors from France, Spain, the Benelux countries and the UK, and any downturn in the security situation would harm growth. Over the longer term, the economy will benefit from a greater exposure to emerging markets in the Middle East and North Africa and in Sub-Saharan Africa.

OPERATIONAL RISK
Morocco offers a number of strategic advantages across its operational risk profile which makes it a more attractive location for investment than many of its regional peers. In particular, relatively high levels of security, an integrated supply chain network, openness to foreign investment and well developed financial markets contribute to an environment conducive to businesses. However, key risks are present in the country's labour market, including low levels of educational attainment, which dampen the competitiveness of the workforce. As a result, businesses may face elevated labour costs and limited availability of skilled workers. Morocco also has one of the highest income and personal tax rates in the Middle East and North Africa region, representing a notable drawback to the country's appeal for businesses.

Source: Fitch Solutions
Date last reviewed: September 18, 2018

10.5 Fitch Solutions Political & Economic Risk Indices

Graph: Morocco short term political risk index
Graph: Morocco short term political risk index
Graph: Morocco long term political risk index
Graph: Morocco long term political risk index
Graph: Morocco short term economic risk index
Graph: Morocco short term economic risk index
Graph: Morocco long term economic risk index
Graph: Morocco long term economic risk index

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Economic and Political Risk Indices

10.6 Fitch Solutions Operational Risk Index


Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
Morocco Score52.939.862.055.254.6
MENA Average47.549.348.148.444.1
MENA Position (out of 18)8174
7
8
MENA Average47.549.348.148.444.1
MENA Position (out of 18)8174
7
8
Global Average49.749.850.049.349.9
Global Position (out of 201)8316052
69
83

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: Morocco vs global and regional averages
Graph: Morocco vs global and regional averages
Country
Operational Risk IndexLabour Market Risk Index
Trade and Investment Risk IndexLogistics Risk Index
Crime and Secruity Risk Index
UAE73.867.879.672.575.3
Qatar65.363.963.167.866.5
Bahrain64.558.468.571.160.1
Oman63.351.059.866.476.0
Saudi Arabia61.763.061.863.258.6
Jordan58.454.959.159.760.0
Kuwait54.852.351.751.164.1
Morocco52.939.862.055.254.6
Egypt47.846.046.453.545.3
Tunisia46.142.352.446.942.8
Iran43.348.738.351.235.1
Lebanon42.747.950.040.632.4
Algeria40.944.031.739.847.9
West Bank and Gaza33.746.436.830.221.52
Libya28.344.426.029.313.4
Syria28.042.930.026.412.7
Iraq27.243.725.228.811.3
Yemen21.730.623.017.316.1
Regional Averages47.549.348.148.444.1
Emerging Markets Averages46.848.047.545.846.1
Global Markets Averages49.749.850.049.349.9

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: August 21, 2018

11. Hong Kong Connection

11.1 Hong Kong’s Trade with Morocco

Graph: Major export commodities to Morocco (2017)
Graph: Major export commodities to Morocco (2017)
Graph: Major import commodities from Morocco (2017)
Graph: Merchandise exports to Morocco
Graph: Merchandise exports to Morocco
Graph: Merchandise imports from Morocco
Graph: Merchandise imports from Morocco

Exchange Rate HK$/US$, average
7.76 (2013)
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
Source: Hong Kong Census and Statistics Department, Fitch Solutions
Date last reviewed: August 28, 2018


2017
Growth rate (%)
Number of Moroccan residents visiting Hong Kong6,378
-0.8

Sources: Hong Kong Tourism Board


2017Growth rate (%)
Number of African residents visiting Hong Kong142,512
-11.6

Sources: Hong Kong Tourism Board, Fitch Solutions
Date last reviewed: August 21, 2018

11.2 Commercial Presence in Hong Kong


2016
Growth rate (%)
Number of Moroccan companies in Hong KongN/AN/A
- Regional headquarters
- Regional offices
- Local offices

Source: Hong Kong Census and Statistics Department

11.3 Treaties and Agreements between Hong Kong and Morocco

Morocoo and China have a Bilateral Investment Treaty which came into force in March 1995.

11.4 Chamber of Commerce (or Related Organisations) in Hong Kong

The Arab Chamber of Commerce & Industry (ARABCCI) was established in Hong Kong in 2006 as a leading organisation at promoting commercial tied between Hong Kong/Greater China and the Arab World.

The Arab Chamber of Commerce & Industry
Address: 20/F, Central Tower, 28 Queens Road, Central, Hong Kong
Email: info@arabcci.org, secretariat@arabcci.org
Tel: (852) 2159 9170

Source: The Arab Chamber of Commerce & Industry

Consulate of Morocco in Hong Kong
Address: 60 Peak Road, The Peak, Hong Kong
Visa section: Room 3401, New World Tower, 18 Queen's Road Central, Central, Hong Kong
Tel: (852) 2138 3388

Source: Protocol Division Government Secretariat

11.5 Visa Requirements for Hong Kong Residents

HKSAR Passport holders can enjoy 30-day visa-free access.

Source: Visa on Demand
Date last reviewed: September 20, 2018

Content provided by Picture: Fitch Solutions – BMI Research