BKGR Report: Moroccan economic resilience in the face of alarming water stress

Morocco continues to demonstrate impressive economic resilience, despite the considerable challenges posed by persistent water stress. The latest report from BMCE Capital Global Research (BKGR) highlights this duality, where economic progress sits alongside an increasingly worrying water crisis.

A robust economic context, but under pressure

The dynamism of investments, both public and private, and the sustained recovery of the tourism sector are the key drivers of Moroccan resilience. Despite an alarming dam occupancy rate, set at only 28% at the beginning of August, the national economy continues to grow. The recovery of the tourism sector is particularly notable, with a 14% increase in tourist arrivals in the first half of 2024 compared to the previous year, reaching 7.4 million visitors. This performance reinforces optimism about the objective of welcoming 17 million tourists in 2024.

However, this growth is taking place in a context of water stress exacerbated by climate change and recurring droughts. Morocco, a semi-arid country, is facing a water crisis that particularly threatens the agricultural sector, a major employer of the population. The situation is critical, with a loss of 141,000 unpaid jobs in rural areas between the second quarter of 2023 and the second quarter of 2024, although 60,000 new jobs have been created in urban areas.

Faced with this threat, the Moroccan government has launched the National Program for Drinking Water Supply and Irrigation (PNAEPI) 2020-2027. This ambitious plan includes the construction of new dams, the creation of water highways, the expansion of irrigation systems and the development of desalination plants. By 2030, it is expected that 50% of the drinking water consumed in Morocco will come from these plants, whose overall capacity is expected to reach 1.7 billion cubic meters per year.

Desalination plays a central role in this strategy, crucial to preserve the viability of agriculture and ensure sustainable access to drinking water for the entire population. These initiatives are essential to counter the impact of water stress on the economy and ensure the sustainability of the agricultural sector.

Positive economic outlook despite challenges

Despite these water challenges, the economic outlook remains promising. The government projects economic growth to accelerate to 4.6% in 2025, after an estimate of 3.3% for 2024. This forecast is supported by continued investment in the construction sector and the confirmation of a monetary easing cycle.

Furthermore, public finances are showing signs of improvement, with a budget deficit reduced to 20.4 billion dirhams at the end of June 2024, compared to 28 billion a year earlier. This improvement is notably the result of the increase in tax revenues and the contraction of compensation expenditures.

The external sector remains dynamic, with a slight increase in the trade deficit and an increase in exports, particularly in the automobile, phosphates and aeronautics sectors. The stock market also benefited from this good news, with indices rising sharply.

The BKGR report highlights the need for Morocco to continue investing in water infrastructure and diversify its water supply sources. The country’s economic resilience is undeniable, but it relies on the ability to overcome water stress that could ultimately slow down this positive dynamic. Managing this crisis is therefore crucial to ensuring sustainable economic development in the years to come.

LNT