Confidence grows for Morocco’s economy in 2021

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n addition to measures introduced to minimise the negative impact of pandemic-related restrictions, Morocco has seen a number of significant regulations introduced over the last 12 months.

These include a new law designed to stimulate funding for small and medium sized businesses and stock trade changes introduced with the intention of expanding the liquidity of the monetary market. There have also been updates relating to Morocco’s adherence to the EU’s BEPS system.

“One of these updates is the new transfer pricing obligations that have been strengthened during 2021 and have a direct impact on foreign investors in Morocco, not only because this is essential when structuring the business plan for investment, but also because failure to properly fulfil it can result in significant fines and penalties,” says Chakib Zaari, founding and managing partner at Baker Tilly Majer, adding that many foreign investors are not yet aware of these changes.

Another important regulatory update affects the tax and banking system by changing the tax systems of the special tax zones to comply with EU regulations. Automatic exchange of information - especially in terms of tax and banking data - will come into force from September 2021 and should increase the attractiveness of Morocco as a destination for foreign investment.

“There has also been a new programme extending social protection to all Moroccans which started in April 2021 and strengthening of the Intilaka project, a financing project for young entrepreneurs,” adds Mohamed Boumesmar, partner at MGI Worldwide CPAAI member firm Audicis.

As per the 2021 Finance Act, credit institutions, insurance and reinsurance and brokerage companies with Casa Finances City (CFC) status can no longer benefit from CFC tax incentives explains Abdellatif Zarkal, partner at PKF Maroc. This amendment was made in order to comply with international tax practices as advised by the OECD. “The 2021 Finance Act also added a provision to limit filing a master file and a local file to large companies only,” he says. “Therefore this documentation will only be mandatory for companies whose turnover or assets are greater than or equal to MAD50m ($5.62m).”

Morocco has also extended for a further year the application of incentives for taxpayers operating in the informal sector who declare their income for the first time; introduced measures to encourage consumption of domestic products; simplified administrative procedures for public procurement; and accelerated the payment process for suppliers of public establishments and enterprises observes Adnane Sebbata, managing partner Horwath Maroc Audit.

“We have also seen the reintroduction of the social solidarity contribution,” says Nassim Karim, partner at Ecovis Morocco. For companies, the social solidarity contribution on profits and income is calculated on the basis of the same amount of net profit used for the calculation of corporation tax and which is equal to or greater than MAD1m for the last financial year.

An amendment to the law on public limited companies and simplified joint stock companies is currently being drafted with the intention of:

• Ensuring a balanced representation of women and men within the administrative and governance bodies of public limited companies
• Instituting a new form of joint stock company called ‘simplified joint stock company’
• Improving the financing capacity of public limited companies by facilitating the use of bond loans
• Setting up a rotation regime for statutory auditors
• Extending the scope of the provisions allowing remote meetings of the administrative bodies of public limited companies

The IMF has estimated that Morocco will be the fifth-strongest African economy in 2021 with a GDP of $124bn. It expects the country’s real GDP to increase by 4.5% this year following a decline of 7% in 2020 and has praised the government’s response to the coronavirus crisis and the reforms it is implementing.

“The agricultural season has been valuable for Morocco, which anticipates extraordinary development in farming output,” explains Jaouad Khayatey, managing partner at PrimeGlobal member firm Fiduciaire Internationale.

There are two main factors to consider when assessing the economic prospects of African countries according to Abdou Soulèye Diop, managing partner at Mazars Morocco. “The first is their industrial development consistency before coronavirus,” he says. “Since the beginning of the pandemic we have noticed a growing movement to promote procurement from African countries, intra-African trade and the consumption of African products. The most industrial countries will be the most active in this area.”

The second factor is anticipated changes to global supply chains as European countries look to reduce the dependence on Asia by moving production closer to the continent. Zarkal observes that the IMF’s forecast of recovery in 2021 remains lower than the 5.2% announced by the Minister of Economy, Finance and Administration Reform during the last Economic Watch Committee in April and the 5.3% announced by Bank Al-Maghrib during the last council meeting of that institution in March

“The rates projected by these two institutions take into account in particular a better-than-expected agricultural season and the favourable progress of the vaccination programme,” Zarkal says. “The control of the pandemic and the acceleration of the vaccination campaign and announcement of the gradual lifting of health restrictions are likely to promote the resumption of economic activity.”

In addition, the good agricultural season will likely promote consumption and therefore economic recovery, adds Zarkal. “However, the question facing economic operators is whether the state will be able to provide support to further boost the economy and allow sectors severely affected by the crisis to recover as quickly as possible.”

Zaari notes that Morocco's economic growth is still strongly influenced by the primary sector, which is very dependent on the rainy season, and that 2020/2021 was a very good year from that perspective, indicating that the country's economic growth should be resilient this year.

“The secondary sector has generally held up well and the economic recovery has been felt in almost all industrial activities,” he says. “The construction sector has continued to grow in 2021. The tertiary sector - and in particular the tourism industry, which is another major driver of the Moroccan economy - is the one that raises the most questions and uncertainties.”

As in all countries that rely heavily on the tourism industry, there is a very strong hope that the 2021 summer season will see a reopening of hotels and a return of foreign and local tourists to Morocco. “The pace of vaccinations in Morocco and around the world and the very low number of cases of Covid in Morocco both point to a strong economic recovery in this sector this summer which - if confirmed - will provide a strong foundation for growth,” adds Zaari.

Issam El Maguiri, managing partner at Russell Bedford member firm El Maguiri & Associés, observes that several banking programmes and business support measures have been launched by the public authorities to boost the national economy, including banking financing product Damane Oxygene and the Damane Relance guarantee programme as well as Intilaka.

“This gives our clients optimism regarding the growth of the Moroccan economy in 2021,” he says. “In view of the prospects for improving economic conditions, we remain optimistic about domestic and international consumption and as a result expect an increase of 10% in our company's turnover.”

The health policy put in place by the kingdom made it possible to curb the pandemic and the vaccination policy will allow a resumption of economic activities, says Karim. “Our objective for the business over the remainder of this year is to continue to support all of our customers and to develop the firm with existing and new clients - the crisis has also made it possible to carry out business buyouts.”

Diop expects an increase in consulting activities as major projects are restarted. “We have built some specific post-Covid offers to help companies emerge from the crisis and readapt strategic plans,” he adds. “We therefore remain confident and optimistic about new business opportunities in the coming months.”

“Most of our clients have confidence in our economy,” adds Boumesmar. “The reopening of borders is approaching and the vaccination policy is progressing rapidly. We feel that our customers are in good shape to restart their development projects.”

In May 2021, the Special Commission for the Development Model presented the long-awaited general report on the Moroccan new development model. After a year of work, the commission produced a report it described as "the result of a broad participatory process of listening, debate and collective intelligence".

“This new step will inspire the new government – elections are to be held in a few months – and should be an innovative basis for developing good programmes for social and economic development,” says Boumesmar.

Sebbata notes that the Moroccan economy has shown resilience in the face of the health crisis. “The High Commission for Planning anticipates an upturn in business in 2021, with growth projected at 4.6% largely as a result of agricultural production which is growing rapidly since the beginning of the year,” he explains. “However, other sectors rose only slowly since January and a stronger recovery of secondary and tertiary activities will probably depend on the gradual lifting of restrictions.”

Zaari’s firm grew organically by 25% in the first quarter of 2021 and he expects to be able to stabilise this growth at around 20% for the year thanks to actions to develop new and existing service lines, activities in other African countries – Mauritania and Niger, for example – investment in recruitment, and synergies with other network firms.