Morocco’s Widening Trade Deficit: A Persistent Economic Challenge

Morocco’s trade deficit with the rest of the world crossed a symbolic threshold for the first time in 2022, reaching 308.8 billion dirhams. Last year was at the same pace with a “hole” of 306.5 billion. For the time being, this deficit is financed by transfers from MREs and revenues from international tourism. But in the long term, these two shock absorbers may no longer hold.

The trade balance shows a chronic trade deficit that has further widened in 2024, to 306.47 billion dirhams (MMDH). For more than forty years, Morocco’s trade with the rest of the world has been structurally in the red.

This “eternal deficit” has been multiplied by more than three in the last two decades. Newly, for the second time in three years, this hole exceeds the symbolic threshold of 300 billion dirhams after the historic record of 2022, at 308.8 billion.

That year, the import bill had exploded, driven by the surge in oil and grain prices following Russia’s invasion of Ukraine. If 2022 will have marked a break, the first one came in 2007, when the trade deficit exceeded the symbolic bar of 100 billion dirhams, 135.7 billion to be precise.

Structural trade deficit

Despite the diversification and the increase in value of its export offer, particularly for the phosphates & derivatives industry and the automobile industry, the trade balance remains the great sick body of the Morocco’s foreign trade. It has never been in balance for forty years. The irreducible imports of petroleum products, coal, and cereals to compensate for the fall in harvests due to recurring droughts (editor’s note: Morocco is in its sixth consecutive year of water stress) are causing the import bill to soar.

According to data from the Foreign Exchange Office, the country purchased 17.83 billion dirhams worth of wheat on the international market, compared to 19.36 billion in 2023 and 26 in 2022. It is understandable why it is courted by the very closed circle of global wheat exporters (Canada, France, Russia, Australia, Romania, Argentina and the United States). The structural deficit in the trade balance is currently financed, in part, by revenues from international tourism and remittances from MREs. These two shock absorbers help to ward off a crisis in external payments as happened in the 1980s.

Apart from controlling inflation, Morocco would not fit into the famous “magic square” of Nicholas Kaldor, the British economist who had theorized the four objectives of economic policy (growth, full employment, price stability and external balance-surplus). The year 2023 ended with a real improvement in the current account, posting a deficit of 0.6% of GDP, partly thanks to the easing of oil prices: a drop of more than 1,800 dirhams in the average price per ton of fuel and, above all, an average drop of 3,460 dirhams in gas prices.

In the geography of Morocco’s foreign trade, the most significant fact of the last 20 years is the rise of China. Trade with the Middle Kingdom, once centered on massive imports of tea by the Kingdom and the export of fertilizers and phosphates by the OCP group, has undergone a change and an acceleration since the commissioning of Tangier Med. The urban middle classes’ voracity for consumer goods has done the rest.

Less and less the world’s factory for ready-to-wear brands or household appliance manufacturers, China exports smartphones, equipment for telecom networks, motor vehicles, laptops, etc. to Morocco.

The Kingdom’s breakthrough in Asian markets is mainly due to the strategy of moving up the value chain, successfully implemented by the OCP group, which appears to be the spearhead of the diversification of the country’s external outlets. Sales of phosphates and derivatives literally exploded by 43.9% in 2022, to 115.5 billion dirhams.

The largest bilateral trade deficits

Trade with China has been showing a worsening trade deficit since 2011. 70.6 billion dirhams in 2021 compared to 21.7 billion ten years earlier. The trade deficit with the United States is also widening, rising to 40.4 billion in 2022.

With regard to Saudi Arabia, the trade balance also remains in deficit, with a “hole” amounting to 46.7 billion. The trade balance is also in deficit with regard to the main trading partner, Spain.

Certainly, the Iberian neighbor is today the largest outlet for textiles and clothing in the Kingdom, far ahead of France and the United Kingdom. However, the trade deficit with Spain is widening, reaching 19.9 billion in 2022.

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(Featured image by John Simmons via Unsplash)

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First published in LES ECO.MA. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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