What the Morocco earthquake means for its economy

Global Courant

On the night of Friday, September 8th, a magnitude 6.8 earthquake hit Morocco. It struck 72km (45 miles) southwest of Marrakesh, Morocco’s fourth largest city. The worst hit was Ighil, a mountainous rural commune in Al-Haouz province near the Oukaimeden ski resort in the Atlas Mountains. But it was so powerful that it sent tremors throughout the country, including the provinces of Ouarzazate, Marrakesh, 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 says 300,000 people in Marrakech and beyond have been affected; a Red Crescent official warned the response 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 ahead of peak season and just as the sector started recovering from the COVID-19 pandemic. Marrakech, a city that boasts of bustling markets, stunning riads and ski resorts in the vicinity, will host the annual meetings of the International Monetary Fund and World Bank in October, attracting thousands of officials.

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The North African country’s economy has already shrunk a lot this year. And on top of that, they have to deal with the aftermath of an earthquake that could cost them billions of dollars. According to the U.S. Geological Survey, potential losses from the disaster could be as low as $1 billion or as high as 8% of their GDP. Morocco has been a bright spot for investors wary of the region’s other fragile economies.

Tourism contributes strongly to Morocco’s economy, along with agriculture and trade with the European Union. Morocco received about 10.9 million tourists last year. Also, foreign tourism is an economic lifeline for the villagers, who supply tourism workers to Marrakesh while occupying the poorest regions of Morocco.

Some of Morocco’s tourist attractions have already taken hits from the quake. For example, parts of Marrakech’s UNESCO-listed historic centre sustained serious damage, with masonry raining down on parked cars and some of its storied alleyways collapsing. Also, one of its most recognizable landmarks, the Koutoubia Mosque, with its 250-foot-tall minaret, sustained damage, and debris from crumbling buildings filled the mazelike passages around it. However, the earthquake left the crown jewel of Morocco’s tourism industry—the ancient city of Marrakesh’s labyrinthine core called the medina— relatively unscathed. These events might, in the short term, deter tourists.

Notably, it will be a reach to say this earthquake will crush the entire economy. Firstly, the four regions affected, including Marrakech-Safi, Souss-Massa, Beni Mellal-Khenifra, and Draa-Tafilalet, contributed less than 25% of the country’s GDP in 2021. Secondly, there is potential for a short-term rebound. In February, an earthquake happened in Turkey, and it stalled the tourism sector. But it has mostly rebounded as summer arrivals to the Mediterranean coast and Istanbul have surged. Even Morocco is still receiving flights from Europe’s major airlines. Also, Morocco’s fiscal position is stronger than most of its North African peers. The country’s foreign reserves, estimated at $32.8 billion, account for more than double its external financial requirements, and direct investment inflows have been steady.

Yet there are worries as any large-scale reconstruction would pile more pressure on an economy jolted by two years of successive droughts. Morocco targeted economic growth of 3.4% this year and sought to trim their budget deficit from 4.5% of GDP to 4% in 2024.

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However, the local economy is the real victim, especially the many villages that live off tourism. Before Friday’s earthquake, the country’s poorest were set to get improved access to subsidies via a direct aid program. On a larger scale, the impact of this earthquake will only become clearer over time.