Morocco Business Forecast Report Q4 2012

Executive Summary
Core Views
Major Forecast Changes
Key Risks To Outlook

Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
Faltering Economy Testing Government's Popularity
Although the Moroccan government appears to have retained a significant degree of public support since its appointment in early 2012,
its popularity will be put to the test by efforts to reform the costly state subsidy system Moreover, in the event that a hike in energy or
food prices provokes social unrest, there is a risk that the government could roll back on its fiscal consolidation plans
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Challenges For The Coming Decade: Scenarios For Change
The ongoing political and economic reforms undertaken by the government in recent years underpin our view that Morocco possesses
one of the most stable political climates in the region

Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
Economic Conditions Far From Recessionary
The Moroccan economy continues to slow, with recent data showing that the impact of weak external demand and a poor harvest
has taken its toll on growth However, while we have revised down our real GDP forecast for 2012 from 3 4% to 3 0%, we stress that
conditions are far from recessionary, and we expect the economy to grow reasonably well by the standards of its regional peers in the
years ahead
TABLE: ECONOMIC ACTIVITY
Balance Of Payments
Dirham Devaluation Can Be Avoided
We expect the Moroccan dirham's peg to a euro-dominated currency basket to be maintained over the coming years Although the
country 's precarious balance of payments position raises the risk of a devaluation, increasing foreign direct investment , lower import
costs and likely inflows of foreign aid will leave the central bank with a sufficient financial arsenal to defend the currency peg
TABLE: CURRENT ACCOUNT
Monetary Policy
Inflationary Pressure Beginning To Bite
We expect inflation in Morocco to continue rising through the remainder of the year Although core inflation will remain subdued, higher
food prices and the scaling back of government fuel subsidies will send the headline print higher, and we forecast inflation to reach 2 5%
y-o-y by end-2012, up from 0 9% at the end of 2011
TABLE: MONETARY POLICY
Fiscal Policy
Subsidy Reforms No Silver Bullet
Although the Moroccan government has taken some significant steps towards fiscal consolidation in recent months, further reforms will
be necessary if public finances are to be successfully brought under control While we continue to expect the government to benefit from
external financial support from the Gulf Cooperation Council , fiscal risks will remain pronounced in the near term
TABLE: FISCAL POLICY

Chapter 3: 10-Year Forecast
The Moroccan Economy To 2021
Private Demand-Driven Growth To Continue
We point to continued efforts to reform the economy and improve education, alongside investment in tourism and energy infrastructure,
as major positives underpinning Morocco's long-term growth trajectory We are pencilling in average real GDP growth of 4 7% a year
over the next decade, with GDP per capita increasing to US$6,223 over the same period Nevertheless, we caution that several issues
such as high unemployment, combined with a growing youth population, if not addressed properly, could pose serious threats to our
positive long-term view
TABLE: LONG-TERM MACROECONOMIC FORECASTS

Chapter 4: Business Environment
SWOT Analysis
BMI Business Environment Risk Ratings

Chapter 5: BMI Global Assumptions
Global Outlook
Q412 Update
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES REAL GDP GROWTH FORECAST
TABLE: REAL GDP GROWTH CONSENSUS FORECASTS
TABLE: EMERGING MARKETS REAL GDP GROWTH FORECAST 29