Agricultural production, which still represents almost 15% of Morocco’s GDP, contracted by around 10% and dragged overall GDP growth down to 1.1% in 2016.
With good rainfall since the fall of 2016, GDP growth is projected to bounce back to 3.8% in 2017. The cereal crop is expected to be above its historical average and agricultural GDP to grow by close to 10%. Nonagricultural GDP is also projected to rise slightly above its recent trend due to the agriculture spillover effect and rising confidence of both consumers and producers. However, the positive cyclical developments are unlikely to translate into major structural improvements in labor market outcomes. Since inflationary expectations are well-anchored, the rate of inflation should remain around 2%.
The ongoing delays in forming the new government following the October 2016 legislative elections are slowing reform momentum. A draft 2017 budget law that contemplates a further reduction in the fiscal deficit to 3% of GDP is nevertheless being implemented.