Earthquake caused 0.24% economic loss in Morocco

The earthquake that hit Morocco last September and left almost 3,000 dead has had a moderate impact on the national economy, causing a loss of 0.24%, according to data from the Policy Center for the New South. This institution, formed by a group of Moroccan experts, aims to contribute to the improvement of economic and social public policies in Morocco and the rest of Africa. 

The centre's report, which analyses the financial burden of the earthquake and reconstruction efforts, notes that the earthquake will cause a 1.3% drop in the GDP of Marrakech-Safi and a 10.2% drop in economic activity in the province of Al-Haouz, the areas most affected by the quake. 

"From these estimates, we can deduce that the earthquake of 8 September 2023 was more of a human tragedy with moderate economic losses, especially at the macroeconomic level," say the institution's researchers, who explain that this conclusion "is supported by the analysis of certain high-frequency financial indicators that demonstrate the resilience of the Moroccan economy after the natural disaster".   

The report also discusses the government's reconstruction and rehabilitation programme for the affected areas. This public initiative allocates 120 billion dirhams in short-term emergency aid for households in the affected areas and financial support for the reconstruction of housing and infrastructure to be upgraded in the medium and long term. This programme also focuses on promoting economic activity in other provinces of the High Atlas. 

Researchers evaluated both phases of this government project. The first focuses on immediate relief efforts, including financial compensation to families for food and shelter, as well as road and other infrastructure repairs. The second part focuses on long-term improvements, including building better roads and schools and creating jobs in agriculture and tourism. 

"We assessed the economic impact of the recovery programme through its two main pillars, considering different assumptions for the financing scheme of the second pillar, ranging from a new injection of funds into the economy (debt) to a complete reallocation of investments from earmarked countries to the affected areas," the report explains. 

Based on Morocco's commitment to maintaining macroeconomic stability, in particular debt sustainability, and in line with the Ministry of Finance's assessment, the centre suggests that Treasury debt "should decelerate from 2023 to return to 2021 levels by 2025". "The scenario that seems most likely for the financing of the second pillar (98 billion dirhams) suggests resorting to investment reallocation as a priority, rather than an increase in borrowing," it adds.

Given this scenario, the researchers estimate that the 120 billion dirham recovery plan will have only a "slight positive impact on growth at the national level", with an average increase of 0.03% over the period 2024-2028. 

"For the High Atlas provinces, significant growth gains are expected thanks to the recovery plan, whatever the funding scenario," the researchers report.  

Finally, the centre's report highlights the difficult choice facing the Moroccan government: to focus on helping the most affected areas, even if that means withdrawing funds from wealthier areas. "Given the political intention to reduce regional disparities and the need to help underdeveloped regions catch up with the development momentum of the rest of the country, we might consider the need to prioritise equity rather than efficiency in such circumstances," the researchers conclude.