Morocco May be Relegated to the Status of a Frontier Economy- MSCI Report

By Loubna Flah

Morocco World News

Casablanca, June 6, 2013

There are fears that Morocco may be relegated to the status of a frontier market due to the sluggish performance of the Moroccan economy during the current year.

Morgan Stanley Capital International (MSCI), a leading provider of investment decision, issued its annual report of frontier markets for 2013.

The MSCI frontier market indices provide broad representation of the equity opportunity set across 32 countries while taking investability requirements into consideration within each market.

Investopedia defines frontier equity markets as investable markets with lower market capitalization and liquidity shortage compared to emerging markets.

Frontier markets are pursued by investors seeking potentially high returns who are able to accept the higher risks these types of markets would be exposed to.

 Some of the risks investors may face in these frontier markets are political instability, poor liquidity, inadequate regulation, substandard financial reporting and large currency fluctuations.

The MSCI report considers that Morocco has been behaving more like a frontier market for the current year. Its stock market is down 5 percent this year to around six-year lows. Morocco has been wrestling with a chronic liquidity strain, high external debt and a widening budget deficit during the current year.

Morocco’s central bank, Bank al Maghrib has been injecting money periodically to ease the liquidity strain, but the crisis lingers.

The strain in liquidity was initially engendered by a massive withdrawal of assets by major Moroccan investors as the government vowed to levy unpaid taxes from their bank accounts without prior notice.

Though many countries fear their relegation into the state of a frontier economy, it is of note these markets  have risen 15 percent since the start of this year, a stark contrast with  emerging markets,  which have fallen around 5 percent so far this year.