As the spectre of economic challenges looms large over African economies, Morocco appears to have a considerable edge over South Africa, according to an assessment from the international bond credit rating business, Moody’s Investor Services.
Underscoring the stark contrast, Moody’s maintained a Ba1 negative outlook for both nations, yet it is Morocco that appears more prepared for a potential economic slowdown, thanks to a more diversified export structure, robust foreign exchange reserves, and a lower risk of social unrest.
A cornerstone of Morocco’s economic fortitude has been its decision to adopt a phased approach to free-floating its currency, a move that harbours significant potential economic benefits as per the International Monetary Fund (IMF).
On the contrary, South Africa is facing a more grave situation due to its constrained fiscal space, compounded by falling productive capacity and persistently high unemployment rates.
The two countries offer a compelling study in contrast to dealing with economic challenges and the impacts of global events like the COVID-19 pandemic. The report comprehensively compared various fronts: credit ratings, political environments, IMF relations, and more.
Morocco’s economy, driven by multiple sectors, exhibits resilience in the face of global economic swings, stresses Moody’s report. The North African nation’s healthy stock of foreign exchange reserves further underpins its capacity to absorb potential economic shocks. At the same time, the risk of social unrest remains relatively low, contributing to overall stability.
The progressive adoption of the free-floating currency regime has also drawn the IMF’s praise, promoting confidence in Morocco’s efficient handling of economic shifts.
South Africa, however, is grappling with a trifecta of constraints: limited fiscal space, declining productive capacity, and a troublingly high unemployment rate that reached a record high of 34.9% in Q3 of 2021. The confluence of these factors has rendered the southernmost country in Africa less equipped to weather economic challenges without experiencing severe impacts.
While both nations are dogged by the same Ba1 negative outlook as Moody’s, their individual capacities to confront and overcome looming economic challenges vary markedly. With its diversified economy, orderly political environment, and robust reserve buffers, Morocco is proving to be deft at manoeuvring through the storm, displaying the resilience and preparedness that its southern African counterpart appears to lack currently.
