Morocco, located in Northwest Africa, gained its independence from France in 1956. Morocco is a constitutional monarchy, in which, King Mohammed VI possesses more authority than either the judiciary or the legislature. Since King Mohammed VI ascended the throne in July 1999, he has actively pursued various economic reforms including the privatization of state-run businesses.
In 2005, Morocco experienced real GDP growth of 2.0 percent, a decrease from the 3.7 percent GDP growth achieved in 2004. Key factors that instigated the slowdown in GDP growth included Moroccos worst drought in 60 years, which cut agricultural output in the county by nearly 50 percent. In addition, the expiry of the Multi-Fiber Agreement in 2005 allowed for Chinese products to flood Moroccos major European textile export market, which caused a 16 percent drop in Moroccan exports to the trade area. Finally, high oil prices negatively affected the Moroccan economy as the countrys energy import bill increased. However, 2006 forecast GDP growth is expected to increase to 4.6 percent due to the Moroccan governments firm commitment to enforce economic reforms, which include working to decrease the countrys economic dependency on the volatile agricultural sector. Also, China made a voluntary decision to restrict its imports to the European Union until 2007.
Both the International Monetary Fund (IMF) and the World Bank have provided valuable funding to Morocco as the county continues to seek economic liberalization. In June 2005, the World Bank endorsed a $150-million loan to Morocco that the government will use to provide housing for the urban poor. The World Bank also approved a $200-million loan in December 2005 that the government will use to make several financial reforms. In the IMFs Article VI report (released in 2005) on Morocco, the IMF noted the need for Morocco to expand output of the non-agricultural sector, but praised the countrys ability to maintain stable prices, a stable current account and stable foreign reserves. In addition, Morocco made a commitment to improve the quality and transparency of its economic statistics by joining the IMFs Special Data Dissemination Standards (SDDS).
On June 15, 2004, the U.S. and Morocco signed a Free Trade Agreement (FTA). The FTA immediately eliminated tariffs on 95 percent of bilateral trade, with the remaining tariffs to be eliminated over the next nine years. The U.S.-Morocco FTA is the first in Africa and the first under the Middle East Free Trade Area initiative. Morocco has also signed several agreements with the European Union on economic cooperation, and one establishing a free trade zone for industrial goods over a 12-year transition period. In addition, Morocco is a partner country of the European Free Trade Agreement.
As of March 2006, the decades-old dispute between Morocco and the Polisario Liberation Front over the Western Sahara region continues. A referendum on the future of the territory, a former Spanish colony, was scheduled for January 1992 under U.N. auspices; however, the referendum has yet to be held. A U.N.-brokered cease fire and settlement plan went into effect on September 6, 1991 although a political settlement is still absent. Recently, there has been increased interest in oil exploration contracts in areas offshore Western Sahara. The legality of these activities will likely remain in question until the status of Western Sahara is permanently settled.