Euro will stabilize Morocco's currency

The listing next January in Morocco of the European single currency "Euro" will contribute to stabilizing Morocco's national currency, the Dirham, The Economist Intelligence Unit (EIU) said.

The value of the Dirham will be calculated on a daily basis against a basket of currencies, the report says, adding that the Moroccan currency will largely follow the Euro at least until year 2000.

The EIU notes that the U.S. Dollar will weaken against the Euro during the two coming years, as economic growth in Europe will be higher than in the USA in 1999 and 2000.

The report predicts a consolidation of the Dirham against the U.S Dollar. That is why, it is almost ruled out that Morocco will depreciate its currency, because it will prefer to maintain a strong Dirham to curb inflation and service external debt.

Unlike recent forecasts of the Economist Intelligence Unit which predict a slowdown in world trade growth, the good news for Morocco is that the European Union, the Kingdom's major trade partner, has managed to come out practically safe from the recent financial instability that rocked emerging nations.

The Union is expected to post a growth rate of 2.3 % in 1999 and 2.4 % in year 2000, the EIU report says.

Moroccan exports will also continue their upward trend to jump from 7.7 billion dollars in 1999 to 8 billion in 2000. Imports are also to increase from 9.9 billion in 1999 to 10.3 billion dollars in 2000.

This upward trend is the result of the continuous restructuring of the Moroccan economy and the modernization of the industrial sector, the report says.

The EIU also predicts a 4.5 % increase in the Moroccan Gross Domestic Product (GDP) in 1999 and 2000. The inflation rate will go up in 1998 to stand at 2.8 % against less than 1 % in 1997. The rate is expected to fall to 1.9 % in 1999 and 2 % in 2000.

However, these figures will continue to depend on the fluctuation of the performance of the agriculture sector, the back bone of the Moroccan economy with 17 % of the GDP.

The flow of the Moroccan expatriates remittances will continue their sustained rise and will contribute to downsizing the deficit of the balance of payments, which will go down from 2.7 % in 1997 to 1.5 % in 2000.

According to the EIU, the external debt servicing will decrease from 31.3 % of the GDP in 1999 to 30.7 % in 2000.