(MENAFN - Morocco World News)
Rabat- For BMI Research, Morocco's fiscal deficit will continue to narrow in the years ahead, but at a slower pace than in previous years.
In its latest economic analysis report, BMI, a Fitch Group firm that provides macroeconomic, industry and financial market analysis, expects Morocco's fiscal deficit 'to continue to narrow in 2018, though the pace of consolidation will likely be more gradual than seen in recent years.'
The study points out that the government's budget priorities for 2018 focus primarily on new tax exemptions rather than revenue-raising measures, which will lead to a deceleration of total revenue growth thus limiting tax revenue growth. Accordingly, only modest fiscal consolidation (deficit reduction) can be expected in 2018.
The authors of the BMI research remain optimistic, however, regarding revenues that are 'set to continue expanding over 2018, though more gradually than in recent years.' They forecast a 'robust economic growth' with a real GDP growth of 3.8 percent in 2018. Following reforms in 2016 that broadened the tax base and modernised the country's tax administration, tax revenues grew in 2017 by an estimated 4.3 percent.
Even though government spending growth will remain 'relatively robust,' BMI researchers expect continued restraint in recurrent spending (wages, salaries, consumption of fixed capital resources), with a slow but continuing reduction in the size of the public sector workforce and committed efforts to limit wage growth through revised salary and promotion policies.
'Although the government looks poised to restrain the growth of recurrent expenditures, capital spending will remain elevated', with an 8 percent increase above the 2017 level being planned. In line with the government's continued focus on improving infrastructure, capital spending levels in 2018 would equal 25.8 percent of total government expenditures, which is a 'relatively high figure by historical standards.'
It is thought by the researchers that three initiatives undertaken by Morocco will consume the majority of the funds, namely the Green Morocco Project (Plan Maroc Vert), which aims to reduce the impact of droughts by providing innovative technology to small-scale farmers, the national energy strategy as well as regional development projects, including increased phosphate mining capacity and expanded highway systems .
The BMI analysis concludes that, 'this elevated capital spending, coupled with the tax exemptions on the revenue side of the budget suggest the fiscal deficit will narrow only to a limited degree.'
'This underpins our forecast for the fiscal deficit to come in at 3.3% of GDP in 2018. While representing an improvement on the estimated 3.5% shortfall recorded in 2017, this is still 0.3 percentage points larger than the government's own target of 3.0%,' indicates the study.