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Morocco predicts growth to drop by half in 2014

January 22, 2014

CASABLANCA, Morocco (AP) — Morocco’s growth will drop dramatically 2014 to just 2.4 percent due to a poor expected harvest, bringing higher unemployment in this North African country, the government’s planning commission predicted Wednesday.

Ahmed Lahlimi Alami, head of the High Planning Commission, told journalists that despite an improvement in the non-agricultural sector, a forecast 28 percent drop in the cereal harvest because of a dry fourth quarter would bring down growth.

The Moroccan economy grew at 4.4 percent in 2013, a rebound from 2.7 percent in 2012, which was also caused by a poor harvest. Despite the development in other sectors, agriculture remains a key employer in this nation of 34 million and the economy remains at the mercy of the rains.

Morocco’s Islamist-led government is in the midst of major belt-tightening that has seen it cut energy subsidies and government investment in an effort to cap rising government expenditures and debt.

Heavy spending on subsidies and government raises to counteract pro-democracy in demonstrations in 2011 left the new government, elected that year, with a heavy bill to pay.

The IMF made a $6.2 billion loan in 2012 contingent on reducing subsidies as well.

Spending on subsidies soared to 53 billion dirhams ($6 billion) in 2012 and had to be slashed by the new government down to 42 billion dirhams in 2013 by reducing subsidies on diesel and gasoline and indexing their cost to the market price.

The 2014 budget forecasts spending just 35 billion dirhams after the government announced in Jan. 17 that all subsidies on high-octane gasoline had been removed while price controls on diesel would be cut gradually through the year.

While inflation has been low in Morocco, just 1.4 percent in 2013, cutting subsidies will raise prices and could bring about a measure of social instability. There are already nearly daily demonstrations by unemployed graduates demanding government jobs.

The fall in growth, however, will exacerbate unemployment, raising the rate from 9.1 percent in 2013 to 9.8 percent in 2014, said Alami. The figures for young people and university graduates are nearly double.

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Associated Press reporter Smail Bellaoualli contributed to this report.

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