Drought, falling tourism threaten Morocco economy

[April 14, 2012]  RABAT, Morocco (AP) -- Morocco's new Islamist government finally passed its 2012 budget last week -- four months late -- while outside parliament hundreds of unemployed protesters demanding government jobs clashed with police.

Long seen as a haven of stability and relative prosperity in North Africa, this close U.S. ally has a rough year ahead. Its budget is overstretched, its farm fields drought-stricken, its credit rating is wobbly, and economic crisis is hobbling its closest trading partners in Europe, even as protests by disgruntled Moroccans are on the rise.

Morocco escaped much of the unrest linked to the Arab Spring elsewhere in North Africa, where the governments of Libya, Tunisia and Egypt all fell, but it could face new troubles this year. The Islamist government elected in November has to pay off a heavy bill of salary increases and promised new government jobs made by its predecessors.

Meanwhile, the skies and Morocco's northern neighbors have made things even worse than originally expected.

Abdelilah Benkirane's government came in with a five-year plan predicting 5.5 percent growth, which it then had to revise downward at the beginning of the year to 4.2 percent. Then at the end of March, the central bank, noting the crisis in Europe and impending drought, cut its own predictions to less than 3 percent.

It was a long way from the past several years of around 5 percent growth buoyed by a string of excellent rains. This year, the harvest is dramatically down and sectors like tourism are suffering as well, as European tourists tighten their belts and forgo Moroccan vacations.

"The main engines of the Moroccan economy are in the process of running out of steam," said Najib Akesbi, an economist with the Hassan II Institute of Agronomy in Rabat.

Morocco remains reliant on agriculture, which makes up 15 percent of the gross domestic product and is almost entirely rain-fed.

In a report from mid-March, the U.S. Embassy estimated that the total cereal harvest would not exceed 3.2 million tons, a sharp drop from 8 million tons in 2011.

"The crops this year suffered not just from drought but from freezing conditions -- abnormally low temperatures sustained for a long time," said Hassan Ahmed, the report's author. "That's what really hurt the germination and the crop development."

The saying in Morocco is that the make or break limit for the rains to come in time for the harvest is March. This year, the rain didn't start falling until the final days of the month, long after the damage had been done.

"The latest rains might help the vegetables, but for the wheat it's too late," said Mohammed Boujellaba, a small farmer along the coast, as a light rain pattered down on to his fields of stunted, calf-high wheat, south of the capital.

"The wheat is now just between 20 and 30 centimeters (a foot) high, it's abnormal," he said. "In years where there is plentiful rain, it can reach up to a meter (yard) or more."

Bread is the country's main source of calories and Moroccans are among the highest per capita consumers of wheat in the world, eating 570 pounds (258 kilograms) a year, according to the U.S. embassy report. With an annual demand of at least 7 million tons, the country now faces a massive import bill.

In the debate to pass a budget, Finance Minister Nizar Barakat on Tuesday dismissed the effects of the drought, saying Morocco's economy had sufficiently diversified into other sectors.

Except that the non-agricultural parts of the economy are ailing as well. Tourism, which makes up at least 10 percent of GDP, was down across the board in 2011 amid the financial crisis in Europe.

The number of hotel nights spent by visitors in Marrakech, the country's main tourist draw, dropped 9 percent, while in the resort city of Agadir they went down 7 percent, according to Tourism Ministry figures.

The biggest drops were nights spent by French and Spanish visitors, 16 and 25 percent, respectively, which make up the bulk of Morocco's tourists.

These pale compared to the catastrophic drops experienced by Egypt and Tunisia in the wake of the Arab Spring, but come at a bad time for Morocco. The figures help explain the rage of tour operators when the new Islamist justice minister made a recent dig at non-pious visitors.

Speaking at a Quranic school in Marrakech, Mustapha Ramid complimented the sheikh for his work in a city that "people come from all over the world to spend time sinning in and being far from God," he was quoted as saying in the press.

"It is economic suicide in a time crisis," stated an angry editorial in the French-language daily Le Matin on Thursday. "We are shooting ourselves in the foot when we attack tourists -- it's irresponsible and dangerous."

Exports to Europe and remittances from Morrocans working abroad have also been hurt by the crisis there.

The new budget projects a deficit of 5 percent of GDP, which will have to be covered with further borrowing.

While international ratings agencies have given Morocco a stable outlook, the country's BBB- rating is just above the speculative level and more debt could prompt a lower rating -- making international borrowing onerous.

"Morocco's rating could be downgraded if the current increase in public deficits was not addressed and caused a further substantial increase in public debt ratio," noted Moody's Investor Service in a March statement.

Amid these grim figures, social unrest is on the rise. Hundreds of unemployed protesters had to be forcibly removed Wednesday from the parliament while the budget was approved, an action typical of the small-scale demonstrations breaking out all over the country.

With the economic situation hurting government efforts to address unemployment and the gaps between rich in poor that sparked last year's pro-democracy protests, more unrest could be on the way.

"Nothing, unfortunately, has changed or is on the road to change," said Akesbi. "The same causes will continue to produce the same effects in the coming year."

[Associated Press; By PAUL SCHEMM]

Associated Press reporter Aziz el-Yaakoubi contributed to this report.

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