Cablegate: Morocco's Balance of Payments: Tourism And

This record is a partial extract of the original cable. The full text of the original cable is not available.



E.O. 12958: N/A

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


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

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.

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