New Moroccan govt faces stiff economic challenges

Rabat (Morocco):  The new government which emerges from Morocco's parliamentary elections faces a growing list of economic challenges, from sky-high youth unemployment to worsening state finances.

The country's budget deficit is expected to hit 6.0 percent of gross domestic product this year, the highest level in a decade and far above the 4.0 percent forecast by the outgoing government, due to increased social spending.

The rise is due in part to the outgoing government's decision to boost subsidies for food and fuel earlier this year to try to ensure social peace as the Arab Spring uprisings toppled regimes in neighbouring countries.

The mildly Islamist Justice and Development Party (PJD), which won the most seats in Friday's election, focused during the campaign on ways to pay for the subsidies instead of cutting them.

It has called for higher taxes on luxury goods and a new tax on unused land to cover the costs of the subsidies.

With 288 out of the 395 seats up for grabs awarded, the party had captured 80 seats in the election, the government said Saturday. That is nearly double the 45 seats won by Prime Minister Abbas el Fassi's Independence Party, which finished second.

Final results will be released on Sunday.

It was the first election since a new constitution that gives parliament and the prime minister more powers was overwhelmingly approved in a July referendum.

The PJD will likely govern in a coalition with several other Left-wing parties.

The new government will be under pressure to use its enhanced powers to tackle the longstanding problem of unemployment, especially among young people.

The jobless rate among Moroccans under the age of 34 stood at 31.4 percent last year, according to government figures.

Every day hundreds of out of work university graduates stage a protest march through the streets of Rabat, Morocco's seaside capital, to demand a public sector job.

Economists estimate that to create 300,000 new jobs each year, the north African country's economy would have to expand by around 6.0 per cent.

The International Monetary Fund predicts the Moroccan economy will grow by 4.6 percent this year.
During the campaign the PJD said it could lift growth to between 6.0 and 8.0 percent, in part by streamlining regulations to attract more private investment in big infrastructure projects.

But with the European Union, the country's main commercial partner, heading towards another recession and gripped by a worsening debt crisis, attracting more investment from Europe will be a challenge.

Foreign investment from other regions has also been on the decline due to the global economic uncertainty.

"Even if they have not left, the rich Gulf countries have reduced their investments," said Mehdi Lahlou, an economics professor at Rabat University.

Reforming Morocco's slow-moving judiciary and cracking down on corruption are key to capturing private investment, experts said.

"Capital is cautious by nature," said Hammad Kassal, an economist at Morocco's Al Akhawayn University, said in an interview published Friday in the news weekly L'Observateur.

"To reassure it and seduce it, a reform of the economic judicial system is needed."

Morocco came in a lowly 85th place in Transparency International' annual global ranking of least corrupt nations last year, behind China, Brazil and Saudi Arabia.

The Berlin-based watchdog bases its 178-nation index on independent surveys on corruption.

Story First Published: November 27, 2011 18:12 IST

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