What Morocco’s earthquake means for its economy

by MMC
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On the night of Friday, September 8, a 6.8 magnitude earthquake struck Morocco. It struck 72 km southwest of Marrakech, Morocco’s fourth largest city. The hardest hit was Ighil, a mountainous rural commune in Al-Haouz province, close to the Oukaimeden ski resort in the Atlas Mountains. But it was so powerful that it caused tremors throughout the country, particularly in the provinces of Ouarzazate, Marrakech, Azilal, Chichaoua and Taroudant.

Since then, Morocco has not been at ease. The Interior Ministry said 2,012 people had died and thousands more were injured or in critical condition. The World Health Organization declares 300,000 people in Marrakech and beyond have been affected; a Red Crescent official warned the answer it would take “months, if not years”.

But that’s not the only problem. The earthquake also struck the heart of Morocco’s tourism industry weeks before the peak season and just as the sector was beginning to recover from the COVID-19 pandemic. Marrakech, a city that boasts bustling markets, stunning riads and nearby ski resorts, will host the annual meetings of the International Monetary Fund and the World Bank in October, attracting thousands of officials.

The North African country’s economy has already contracted significantly this year. And on top of that, they have to deal with the consequences of an earthquake that could cost them billions of dollars. According to the US Geological Survey, potential losses from the disaster could amount to $1 billion or 8% of their GDP. Morocco is a positive point for investors who are wary of other fragile economies in the region.

Tourism contributes significantly to Morocco’s economy, alongside agriculture and trade with the European Union. Morocco welcomed around 10.9 million tourists last year. Additionally, foreign tourism provides an economic lifeline for villagers, who provide tourism workers to Marrakech while occupying Morocco’s poorest regions.

Some tourist attractions in Morocco have already been affected by the earthquake. For example, parts of Marrakech Historic center classified by UNESCO suffered serious damage, masonry spilled onto parked cars and some of its historic alleys collapsed. Additionally, one of its most recognizable landmarks, the Koutoubia Mosque, with its 250-foot-high minaret, suffered damage and debris from ruined buildings filled the labyrinthine passageways surrounding it. However, the earthquake left the jewel of Morocco’s tourism industry – the labyrinthine core of the ancient city of Marrakech called the medina – relatively unscathed. These events could, in the short term, deter tourists.

In particular, it would be an exaggeration to say that this earthquake will crush the entire economy. First, the four affected regions, including Marrakech-Safi, Souss-Massa, Beni Mellal-Khenifra and Draa-Tafilalet, contributed less than 25% of the country’s GDP in 2021. Second, there is potential for a rebound in the short term . In February, an earthquake occurred in Türkiye. blocked the tourism sector. But it has especially rebounded with the increase in summer arrivals on the Mediterranean coast and in Istanbul. Even Morocco continues to receive flights from major European airlines. Furthermore, Morocco’s fiscal situation is stronger than that of most of its North African peers. The country’s foreign exchange reserves, estimated at $32.8 billion, represent more than double its external financial needs, and direct investment flows have remained stable.

Yet concerns remain because any large-scale reconstruction would increase pressure on an economy shaken by two years of successive droughts. Morocco was targeting economic growth of 3.4% this year and sought to reduce its budget deficit from 4.5% of GDP to 4% in 2024.

But it is the local economy which is the real victim, in particular the many villages which make their living from tourism. Before Friday’s earthquake, the the poorest country were about to gain greater access to grants through a direct aid program. On a larger scale, the impact of this earthquake will only become clearer over time.

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