Crisis-hit Moroccans join ‘informal economy’ as job market shrinks

People wearing face masks sit at a cafe in the capital Rabat, after the authorities eased lockdown measures in some cities, that had been put in place in order to limit the spread of the novel coronavirus, on June 25, 2020. (File/AFP)
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Updated 14 July 2020

Crisis-hit Moroccans join ‘informal economy’ as job market shrinks

  • More than a third of Moroccan workers are already in the informal economy
  • However, the crisis is expected to expand this informal economy as people lose their jobs

RABAT: The coronavirus crisis is expected to expand Morocco’s informal economy of people who work for cash, reducing tax revenue and leaving many without social protection, the head of the state planning agency and economists said.
More than a third of Moroccan workers are already in the informal economy, doing manual or domestic labor, driving taxis or selling in the streets, accounting for 14% of gross domestic product, according to the agency.
However, the crisis is expected to expand this informal economy as people lose their jobs in companies and consumers seek the cheaper goods and services provided by workers who are not registered with the state’s pension fund.
Morocco, with 16,047 coronavirus cases, last month allowed cafes, restaurants and other services to resume activity at half capacity except in provinces where infections remain high. Last week, it extended an emergency decree giving local authorities leeway in taking restrictive measures until Aug. 10.
Unemployment is expected to surge to a rate of 14.8% in 2020 from about 9.2% before the pandemic, the agency said.
Fatima Hamdane, 53, who lost her job as a worker at a car parts manufacturing plant in Casablanca, said she would work as a cleaner even if her employer did not pay social security duties. She has diabetes and has already skipped medical checks because of her hard financial situation.
“I knocked on many doors, but couldn’t find a job,” she said. “Most have rejected me because of my age.”
Ahmed Lahlimi, the planning agency chief, told Reuters that while the number of people moving into the informal economy was expected to grow, the agency did not have any updated figures estimating the extent of the problem.
The informal economy already costs the state 34 billion dirhams ($3.4 billion) in annual tax losses, Finance Minister Mohamed Benchaaboun said.
Morocco’s fiscal deficit stood at $2.3 billion at the end of May with revenue down and spending up because of the crisis. It is expected to widen to 7.5% of gross domestic product in 2020 from 4.1% last year while the economy is expected to shrink by 5%, according to the government’s reviewed budget.
The Confederation of Moroccan Enterprises, a business group, says the informal economy puts 2.9 million jobs at risk in formal companies by undercutting their costs. In May, it recommended offering tax incentives to make more companies register officially.
“In the past, the state has tolerated the informal economy in times of social tensions such as during the 2011 pro-democracy protests,” said Rachid Awraz, of the Moroccan Institute for Policy Analysis.
But, in the long run, it leaves workers without social protection and prey to poverty in addition to its low added value for the economy, he said.
Labour Minister Mohamed Amekraz did not answer Reuters requests for comment.

Oil climbs on positive China data, hopes for US stimulus package

Updated 11 August 2020

Oil climbs on positive China data, hopes for US stimulus package

  • Iraq to deepen supply cuts in August and September; China’s factory deflation slows in July

LONDON: Oil rose on Monday, supported by an improvement in Chinese factory data, rising energy demand and hopes for an agreement in the United States on more coronavirus-related economic stimulus.

Brent crude rose 75 cents, or 1.7. percent, to $45.15 a barrel, and West Texas Intermediate (WTI) US crude was up 94 cents, or 2.3 percent, to $41.16 a barrel.

Saudi Arabian Aramco CEO Amin Nasser said on Sunday that he sees oil demand rebounding in Asia as economies gradually open up.

China’s factory deflation eased in July, driven by a rise in global oil prices and as industrial activity climbed back toward pre-coronavirus levels, adding to signs of recovery in the world’s second-largest economy.

“With oil demand still slowly grinding higher, and oil supply in check due to the OPEC+ production cut deal and prices too low to incentivise strong production growth in the United States, the oil market remains undersupplied,” UBS analyst Giovanni Staunovo said.

Iraq said on Friday it would cut its oil output by a further 400,000 barrels per day in August and September to compensate for its overproduction in the past three months.

The move would help it comply with its share of cuts by the Organization of the Petroleum Exporting Countries and allies, a grouping known as OPEC+.

“This would send out a strong signal to the oil market on various levels. That said, this would also require the international companies operating in Iraq to join in with the cuts,” Commerzbank analyst Eugen Weinberg said.

Prices also found some support after US President Donald Trump said US House Speaker Nancy Pelosi and Chuck Schumer, the top Democrat in the Senate, wanted to meet with him to make a deal on coronavirus-related economic relief.

The talks between Democrats and members of Republican Trump’s administration broke down last week.

“The longer this drags on, the worse it is for the demand scenario,” said Michael McCarthy, market strategist at CMC Markets and Stockbroking.

However, uncertainty over rising tensions between the United States and China put some pressure on prices. Trump signed two executive orders banning WeChat and TikTok in 45 days’ time while announcing sanctions on Chinese and Hong Kong officials.

Markets will now keep an eye on a China-US meeting on trade scheduled for this weekend.