The Moorish Wanderer

Middle Of the Road: Morocco and the Rest of The World

Posted in Dismal Economics, Moroccan Politics & Economics, Morocco, Read & Heard, Tiny bit of Politics by Zouhair Baghough on August 29, 2011

The great thing about growth that it sometimes give the illusion of development. in Morocco’s case, it serves well the mantra of “Morocco is Changing”: things are no longer the same. Things are improving; slowly, yes, but improving nonetheless. As a matter of fact, and save for the hardened nihilist, there is little to discuss over the occurring “change”, meaning that on absolute terms, we are improving standards of living and structural investments are being carried out. The real debate is over whether it is “too little too late” and “not enough” on the one hand, and “sureness of touch” and “prudence” on the other; Between a thrust for more rapid change, and the contentment with the current pace of change.

My claim here is to prove, with a set of figures, that Morocco is behind the global trend of growth in income, wealth, productivity and other indicators, and perhaps even so relative to comparable countries and synthetic benchmarks. Along other pieces of evidence, we might as well conclude that since we are going to slowly, there must be something wrong, and considering the discrepancies with comparable countries, that is imputable to some sort of cost, a cost to development, so to speak, that might be multifarious, perhaps mainly institutional. But that, of course, remains to be proven. In any case, the evidence is there to prove that even if we are increasing wealth per capita -among other indicators- we are either slightly behind, or the increasing process is not full mastered; too much ‘noise’ in the economy’s progression hinders that very progress.

The proposed methodology, without a significant loss of generality, considers Moroccan economic indicators with respect to synthetic indexes, the World Index and various “Morocco counterparts” Indexes – as provided by the World Bank Database (the World Index for instance, is going to be a much-used benchmark)

The one basis point advantage to Morocco did not make the difference

Morocco vs the World: Respective countries are given weights commensurate to their GDPs across time so as to obtain the World index. These are.We then consider 1980 as a base year – a 30 years time scale can be considered to be long enough so as to deliver meaningful results. We then run these weights on the following constant variables:

- GDP Per Capita: in 1980, Moroccan GDP made up for 0.17% of World GDP- in 2010, it was only 0.14%, even though Moroccan GDP grew on average 3.8%, while global average growth, on the other hand, was 2.86%. So over the last three decades, Morocco grew 1 basis point a little bit above the whole world, and yet manages to grow smaller in relative size… It has to do with a higher growth volatility, which tends to have a negative impact on the cumulative benefits of growth (and development, if some extrapolation might be allowed here) the stated policy of growth as a mean of development, officially endorsed by the government (as well as the IMF and Morocco’s significant partners) seems to overlook the other, equally essential feature for this to succeed: stability in growth.

The graph shows the high volatility that prevents consolidating cumulative output – for the record, world growth volatility (i.e. standard deviation) amounted to 1.41 over the considered period, while Morocco’s was much larger -4.6- which means, among others, that Morocco experienced more recessions (or negative growth)

Because the economy is unable to stabilize its dynamics across time, we end up with a lower relative GDP, but also, lagging behind wealth creation as well: Morocco almost tripled its GDP per capita between 1980 and 2010, but that is not enough, since global wealth almost quadrupled in the meantime, thus rendering the one-point advantage in average growth pointless.

Morocco GDP conditioned by its agricultural output.

All is not gloomy however: the strategic choice of agriculture, made very early on, pays indeed: when compared to the global trend, Moroccan agricultural output per worker is way above, both in average returns and computed trends; Then again, the global trend is less volatile, but previous observations on GDP do not apply in agricultural output. It is worth pointing out however, the very strong correlation between Agricultural and total GDP shapes up the Moroccan economy’s growth (by contrast, there is little correlation worldwide) and there is evidence that agricultural GDP, whether through its direct contribution to economic growth, or with its influence over macroeconomic variables, tends to condition growth overall.

The discrepancy between Morocco’s growth and the world’s, in effect, can be accounted for by measuring agricultural volatility; Though the choice of this particular economic activity is subject to debate, even this stated policy failed in delivering consistent results; A policy designed to make sure Moroccan agriculture strong, efficient, or, in short, aimed at insuring Morocco’s self-sufficiency, but fails to sustain stable levels of output, fails to fulfil itself as well.

Gross Capital Formation 1980-2009

These odd occurrences are not restricted to agriculture or GDP growth; indeed, on investment, Morocco does better than the rest of the world, yet it does not sustain its commitment to expand output; Indeed, there again volatility in investment spendings is higher than the global average, which squanders the advantage of “doing better”. The indicators, for all their shortcomings (after all, GDP does not capture other items,on which Morocco might be performing exceptionally well…) do deliver a message of inconsistent growth; the structural policies -the strategic choices made by the highest authorities- should address the pressing problem of volatility, and promote stable policies, instead of engaging in bombastic projects.

Morocco vs selected benchmarks: the same applies to Morocco compared to selected benchmarks; First off, Middle-income countries tend to do better compared to Morocco’s performances; Overall, Morocco does better than MENA countries in terms of GDP per capita, even in terms of stability; but if it is indeed the case, that advantage is small enough to doubt any significant gains over our neighbours: after all, a 20-basis points advantage over MENA countries conveys the same message: Morocco increased its GDP per capita 2.90 times,  MENA 2.70, it is, for those who like to denigrate Algeria for instance, a pyrrhic victory indeed.

The good news are rather short: for Morocco was comparable enough to Midde-income countries in the 1990s, but then again, right from 2002, the existing gap grew wider, and Morocco lost its bet to become a Middle-income country. And there is indeed a link between the failure to catch up with these countries (among others, Jordan, Tunisia, Turkey, Cuba(!) Iran, Algeria and Romania) and the irregularity with which the domestic economy grew. And if we were to link that further to the potential GDP (and the failure for the economy to stick with its trend) then priorities in terms of development need to be reversed: high spendings on infrastructure (the “Grand Designs“) are all very well, but as far as the official documentation goes, there is no particular anticipation of long-term implications; Will an additional highway insure a robust basis-point growth, or won’t it? Would these investments insure a stable growth and stable economy?

Morocco versus comparable benchmarks: does well, but loses the catchup bet early 2002.

Since Morocco is indeed freed from the downsides (if there were any of those) of short-lived political governments, those in charge are, in effect, responsible for the recorded volatility over the last 30 years, and the failure to catch-up with Middle-income countries in the early 2000s. Political power does come with economic responsibility, the least of which is to grant decent (and stable) standards of living to all Moroccans, and not just the privileged few.

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2 Responses

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  1. EAE N. (@strategist01) said, on August 29, 2011 at 23:39

    I read your analysis with great interest. I concur that agriculture is a key element in stabilizing growth and have embarked since 1996 on describing a strategy that would enables us to offset or at least mitigate the effects of possible scarce water precipitations on our economy.

    Simply put, a virtuous chain between renewables, desalination and advanced agricultural techniques could allow us to grow our agriculture even on arid land. Since agriculture remains the backbone of our economy, the aim is to strengthen it and to render it resilient in the face of climate.

    Morocco always fared good when rainfall was plentiful and bad otherwise, now is the time to act to brake that dependency.

    You can find it all here and here

  2. [...] Middle Of the Road: Morocco and the Rest of The World The great thing about growth that it sometimes give the illusion of development. in Morocco’s case, it serves well the mantra of “Morocco is Changing”: things are no longer the same. Things are improving; slowly, yes, but improving nonetheless. Source: [...]

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