Morocco's economic, political and regional landscape: Key risks from this week

Welcome to this week’s edition of our Weekly Risk Watch, offering insights into economic indicators, political shifts, and security updates that could impact your business or daily life, all in one concise package.

Economy and Markets:

• Major real estate developers in Casablanca and Marrakech are facing intensive tax audits due to suspicions of fraud and tax evasion, with inspections initiated by the General Directorate of Taxes based on complaints, revealing extensive discrepancies in financial statements and a reliance on “black money,” prompting developers to seek legal assistance to negotiate conciliatory agreements amid potential tax liabilities totaling billions.
• The real estate sector is experiencing timid growth, with a 7.2% increase in cement sales and a 12.1% rise in transactions by August, signaling a cautious recovery that could be threatened by regional price disparities.
• The annulment of fisheries and agriculture agreements by the European Court of Justice raises concerns among Moroccan professionals, who fear it undermines their livelihoods and disrupts years of trust and cooperation in the market, adding risk to economic disruption.
• The High Commission for Planning reported that Morocco’s economic growth slowed to 2.4% in Q2 2024, down from 2.5% in the same quarter of 2023, driven primarily by domestic demand, while non-agricultural activities grew by 3.2% despite a 4.5% decline in agricultural output.
•  Morocco’s foreign trade dynamics in Q2 2024, with imports and exports dropping by 6.1% and 5.5%, respectively, primarily due to decreased average values in key usage groups, including significant declines in industrial equipment, semi-finished products, and raw materials, adding a risk of trade imbalance.
• The Moroccan Confederation of Very Small, Small, and Medium-Sized Enterprises is urging government officials to pressure the General Confederation of Moroccan Enterprises and owner of “Young Builders,” to settle outstanding debts owed to SMEs for goods and services, following unsuccessful prior attempts to resolve the issue amicably.

Political Stability:

• The Criminal Chamber of the Court of Appeal in Casablanca has  sentenced several officials from the Ministry of Health and Social Protection, along with company owners, to custodial terms ranging from 3 to 8 years for serious charges related to corruption and manipulations in hospital supply and equipment purchases.
• The National Working Group has called for Moroccans to join a national march in Rabat on October 7, 2024, to commemorate the first anniversary of the Gaza war expecting widespread participation from various political and social groups in solidarity with Palestine, adding to protests against normalization.

Cross-border stability:

• During the 79th session of the United Nations General Assembly, Malian official Abdoulaye Maiga accused Algeria of “harboring terrorists” and interfering in Mali’s internal affairs, a risk to escalating tensions between Mali and Algeria.
• The Moroccan Association for Citizenship and Human Rights condemned Algeria’s military regime for escalating tensions by imposing entry visas on Moroccan passport holders, saying it violates international charters and exacerbating conflict with Morocco.

Security:

• In his semi-final report on the situation in the Sahara, UN Secretary-General Antonio Guterres revealed that the MINURSO investigation into the “Smara bombings” confirmed the use of high-explosive 122 mm rockets, allegedly launched by the Polisario Front, resulting in one civilian death and three injuries, in a risk to instability in the southern provinces.