US embassy cable - 05RABAT1104

UNCLAS SECTION 01 OF 02 RABAT 001104 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON, ETRD, EFIN, MO 
SUBJECT: MOROCCO'S BALANCE OF PAYMENTS: TOURISM AND 
REMITTANCES COMPENSATE FOR TRADE 
 
 
1. (U)  SUMMARY:  Morocco continued to post a Balance of 
Payments (BOP) surplus in 2004, despite chronic and 
increasing negative trade balances.  Preliminary government 
figures post a $1.8 billion BOP surplus in 2004 
(approximately 2% of GDP) up from $1.6 billion in 2003. 
Foreign reserves stand at $15.2 billion, equivalent to almost 
12 months of imports.  Morocco's BOP surplus depends on 
non-trade elements of the services and private transfer 
accounts of the BOP, specifically tourism and remittances, to 
compensate for its worsening merchandise trade deficit. 
Preliminary GOM figures recently released for 2005 indicate 
these trends will likely continue.  END SUMMARY 
 
Balance of Payments Summary 
 
2. (U)  Preliminary government figures indicate that in 2004 
Morocco registered a BOP surplus of $1.1 billion.  This 
follows three continuous years of surpluses (2003, $1.6 
billion, 2002, $638 million, 2001, $3.8 billion).  Since 1999 
Morocco has only registered a BOP deficit in 2000 (-$415 
million).  The dramatic spike in remittances in 2001 ($3.2 
billion) remains unexplained.  Some believe Moroccan 
expatriates in Europe rushed to exchange or use cash savings 
of national currencies as the Euro was introduced.  Others 
believe the September 11th attacks prompted a patriotic 
outpouring that manifested itself in increased transfers. 
Neither theory is fully satisfying, especially considering 
remittances have since exceeded that same level in real terms 
in 2004. 
 
Current Account Roundup 
 
3. (U)  Morocco registered a diminished current account 
surplus of $1.1 billion in 2004, continuing a three year 
trend of surpluses (2003, $1.6 billion, 2002, $1.4 billion, 
2001, $1.6 billion).  Adjusting for fluctuations in the value 
of Morocco's currency (from 11.3 dihrams/dollar in 2001 to 
8.8 in 2004) reveals a downward trend reflecting Morocco's 
worsening balance of trade, the result of both decreasing 
exports but mostly increasing imports.  GOM figures show that 
by excluding tourism receipts or remittances from the current 
account, Morocco would register a worrisome deficit.  Trade 
in general goods and merchandise, transportation and 
government receipts from tariffs and licenses all post 
deficits.  Tourism and remittances compensate for Morocco's 
weak visible trade balance.  Tourism and remittances receipts 
have grown stronger over the past five years.  They offset 
the negative balance of trade in goods to maintain a healthy 
supply of foreign reserves. 
 
Goods and General Merchandise 
 
4. (U)  Balance of Trade in goods fell in 2004 to -$6.5 
billion from -$4.3 billion.  While Morocco posted a slight 
increase in exports to $9.8 billion from $8.8 billion in 
2003, export receipts have not kept pace with increasing 
imports.  Over the past five years this trend has gradually 
worsened.  In 1999, Morocco posted a deficit of -$2.4 billion 
in goods traded.  This grew to -$3.2 billion in 2000 where it 
stayed (roughly) until 2003 when the deficit in traded goods 
increased again to -$4.3 billion. 
 
Tourism Saves the Day 
 
5. (U)  Overall Services receipts increased to $3.4 billion 
in 2004 up from $2.6 billion in 2003, reflecting a positive 
trend over the past five years driven primarily by tourism 
receipts.  Tourism posted a surplus of $3.3 billion in 2004, 
up from $2.6 billion in 2003 and $2.2 billion in 2002.  GOM 
data show tourism receipts increasing 8.2% in the first 
quater of 2005, representing a 38.4% increase over the 
average first quarter tourism receipts recorded during the 
past five years.  Receipts for the month of March 2005 were 
up 19.1% from March 2004.  The positive trend in tourism 
receipts reflects the GOM's commitment to developing its 
tourism sector through direct government investment combined 
with private sector incentives.  Its ambitious Vision 2010 
project seeks to double the number of tourists coming to 
Morocco by 2010. Tourism receipts dominate the services 
section of the current account eclipsing all other categories 
combined. 
 
Remittances 
 
6. (U)  GOM figures show a 2.9% increase in receipts from 
remittances in the first quater of 2005.  This figure 
represents a 24.2% increase above the average first quarter 
receipts received between 2000 and 2004.  Along with tourism 
receipts, remittances are critical to Morocco compensating 
for a weak trade balance and maintaining its foreign exchange 
reserves.  Morocco typically receives $3 billion to $4 
billion annually in remittances equivalent to almost 10% of 
GDP. 
 
7. (U)  COMMENT:  Morocco has grown increasingly dependent on 
the foreign exchange it receives through tourism receipts and 
remittances.  Foreign analysts have questioned the 
sustainability of Morocco's BOP surpluses and warned of the 
dangers posed by over-exposure to foreign reserve sources 
perceived vulnerable to sudden fluctuations.  Many GOM and 
private sector contacts contend that the vulnerability of the 
tourism sector is exaggerated.  They argue Morocco's tourism 
industry has largely untapped potential that is only now 
beginning to be fully realized.  Moreover, Morocco's 
experience with tourism fluctuations after the May 16 2003 
bombings in Casablanca showed the industry to be remarkably 
resilient.  A recent study by the IMF suggests that 
remittance flows may not be as volatile as commonly believed. 
 The study suggests remittances may be a sustainable source 
of foreign exchange for Morocco, at least in the medium term. 
 Remittances are motivated, in part, by "altruism" and 
"attachment to homeland", both of which have remained 
consistent.  The study also showed an inverse relationship 
between Morocco's real GDP and remittances (as real GDP 
decreased, remittances increased.)  However, Morocco's 
worsening balance of merchandise trade remains troubling, 
despite tourism receipts and remittances that soften the 
shock to the BOP.  END COMMENT. 
RILEY