Morocco allocates US$500m to support agriculture

In early April the Ministry of Agriculture announced that MAD 4.5bn (just over US$500m) will be allocated to provide incentives for private investment for the agricultural sector in 2021.

The government support, channelled through the country's Fonds de développement agricole, represents a nominal increase of 7% year on year. The authorities have increasingly attempted to direct investment incentives towards small-scale farmers; in 2019‑20, 58% of incentives went to farms with less than 10 ha of land. The support mechanism helped to push up investment in the agriculture sector from Dh8.6bn in 2019 to MAD 9.7Bn in 2020.

The agricultural sector remains a key component of Morocco's economy, accounting for roughly 11% of GDP in 2019 and employing more than 30% of the workforce. Because of the sector's heavy dependence on annual rainfall patterns, the authorities have used investment incentives to attempt to modernise the sector through mechanisation and irrigation expansion, in order to make agricultural yields more resilient to variations in weather patterns. However, these measures have had little impact and agriculture remains heavily dependent on rainfall; the sector contracted sharply in 2019‑20 because of drought.

The agricultural and agro-industrial sector was one of the few sectors that sustained export levels during the economic crisis brought on by the coronavirus pandemic. It is now the second most important exporting industry after the automotive sector—agricultural and agro-industrial exports reached MAD 62.5bn in 2020, a 0.7% year-on-year increase.

We believe that Morocco is unlikely to see a sustained economic rebound before 2022, but economic recovery in 2021‑22 will be supported by the agriculture sector. Although Europe buys for roughly 60% of Morocco's agricultural exports, food distribution logistics chains have remained intact even under lockdown conditions in multiple European countries. As a result, even if economic recovery in Europe is delayed by new COVID‑19 variants and slow vaccination rates, Moroccan agricultural sector growth will remain resilient. The sector's performance will remain tied to rainfall conditions in the kingdom instead.

The agricultural sector will withstand the current economic downturn better than most other sectors. However, the sector's performance will remain vulnerable to rainfall variations for the foreseeable future. 

Source: The Economist 8/4

Herder