Was 2011 as Rosy as N. Baraka Makes out?
A press conference was held a week ago in Rabat, during which Finance Minister Nizar Baraka and his Budget liaison Driss Azami presented journalists with their primary findings on Morocco’s economic performances for 2011.
I would like to start off with the conference’s closing statement:
LE MAROC A FAIT FACE AVEC SUCCÈS AUX GRANDS DÉFIS ENGENDRÉS PAR LA CRISE MONDIALE :
Après plusieurs années de politiques macroéconomiques et de réformes politiques avisées, le Maroc a disposé des marges de manoeuvres nécessaires pour affronter la crise internationale de 2009 et répondre aux demandes sociales qui se sont exprimées lors du Printemps arabe en 2011.
Dans cette conjoncture difficile, le Maroc a enregistré de bonnes performances économiques ainsi qu’une amélioration de ses indicateurs sociaux.
But did it? While it is understood Morocco has engaged in structural macroeconomic reforms, it seems the presentation exaggerates the effects of these reforms; In fact, the only viable policy to display efficiency was the steady decrease in Debt relative to GDP, a sound policy scrupulously carried out for almost 20 years. This has allowed for discretionary spendings and borrowings in the last two years, but this is hardly a victory.
In fact, the euphemism used to justify the obtained ‘room for manoeuvre’ hardly provides a disguise for the response to social demands; the Compensation Fund was short of some 18Bn, and a matter of ‘national interest’ was invoked to wrestle executive control over the money. For reference, 18Bn dirhams represents:
* 96% of total domestic VAT receipts
* 90% of total foreign borrowings accounted for in the 2012 Budget Bill
* 71% of total income tax receipts
* 8% of total receipts for the Budget.
that amount of money was appropriated with no parliamentary oversight, since the ‘national interest’ motive allows MINEFI officials to go ahead with it. Macroeconomic reforms have failed in that respect to make sure money is properly appropriated, I would argue.
And there goes another policy mistake: while the last government aggressively supported the compensation fund, it has also taken away some of its subsidies by means of VAT receipts; the presentation reports the stunning figure of 6% VAT receipts relative to GDP, about the same amount spent on compensation: 48Bn dirhams giveth and taketh away – with perhaps some snide trickle-down effects that harm purchasing power and middle class wealth. Even more disturbing is the fact that Income tax receipts have decreased after the 2008 tax code reform, and that is mainly due to the scrapping of the 42% marginal rate. Ironically, the presentation boasts:
Une hausse des dépenses ordinaires sous l‘effet de l’aggravation de la charge de la compensation et des mesures prises dans le cadre du dialogue social.
“dialogue social” indeed…
There are many hidden facts in this seemingly triumphalist communiqué, perhaps most importantly the claim that inflation was ‘tamed’, to an average of 1.8% between 1996 and 2011, compared to 6.2% between 1990 and 1995. Be that as it may, but the claim overlooks the recent change in CPI computations – the new ICV-based inflation index has been computed with a relatively inflationary base year (2006) and core inflation tends to disparage the volatility effect on households’ purchasing power. The minister couldn’t have picked a worse indicator, even with a break down analysis per category. non-food inflation rate of 0.6% increase with a 3.3% base inflation year does not tell much about the government’s policy towards price control. For the record, this is not the first time minister Nizar Baraka has stumbled over figures, mind you.
Unemployment has not improved much as well:
LE TAUX DE CHÔMAGE DES JEUNES ET DES DIPLÔMÉS DEMEURE ÉLEVÉ
since it is an established fact that unemployment in Morocco falls heavier on graduates and young individuals. And there goes one particular aspect of the ‘Moroccan Exception’: economic theory stipulates unemployment should be lower among those with labour skill, usually signalled with a degree; But the sorry state of Morocco’s basic and higher education creates a perverse state whereby universities tend to produce unemployed graduates – who usually consider public sectors jobs as rightfully theirs and refuse, for those keen to challenge common sense, point-blank to work somewhere else.
The trouble is, opposition and government alike are bound to uphold that rosy picture. At one point or the other in the selected time frame (1990-2011) each and every major political party has been associated with government, or sanctioned these policies (including MPDC-turned-PJD in 1997 for a while) and a strange consensus is strongly established to defend a common record, hence denying it any particular scrutiny.