International Seminar on Early Warning and Business Cycle Indicators 14 - 16 December 2009 Scheveningen, The Netherland

1. International Seminar on Early Warning and Business Cycle Indicators 14 - 16 December 2009 Scheveningen, The Netherlands GDP estimates and indicators constraints: experience of Moroccan Kingdom Abderrahmane Kacemi Morocco

2. Introduction • Tracking and analysing the current economic situation, any where in the world, are today dependent on reliable synthetic high frequency statistics, available within the shortest time possible. • If the low frequency data constituted, for a long time, the necessary tool of the analysis and policy decisions making in Morocco, as it is the case in many countries, it is because the economic evolution worked in the same logical way of this periodicity. • The limited means of communication, the geographically and functionally restricted financial markets made that the economic issues, requiring solutions, were relatively adapted to the medium and long term tendencies, etc. Accordingly, a statistical system of annual reference has been built making it possible therefore to get information and to pass to decision making.

3. Currently, with: the financial and economic crises which follow one another and the development of the transactions and transmissions, Moroccan policymakers are convinced that: • Analysis of the conjuncture, • Anticipatory expectations based on tools of short term forecasting, • Business cycles, dated Turning points of the activity, All based on the availability of synthetic and relevant short term data, allow tracking and controlling the economic situation and enable designing policies facing shocks that could have thereafter dramatic impacts on the overall activities in the country. The problem is crucial when it is a concern of synthetic data reflecting a coherent framework of relationships between various categories of information such as the national accounting.

4. National Accounts Moroccan statistical system is still much more annual periodicity aspect than low frequency one. Big efforts have been done over the ten last years to construct first of all a set of macroeconomic aggregates from a reliable comprehensive system of national accounts. National Accounts make use of the almost annual economic statistics as well as of a broad range of social and demographic statistics and thus allow performing suitable and relevant synthetic annual indicators:

5. Morocco carried out the modernization of its national accounting by implementing the SNA 1993. • This work led to the development of the complete sequence of the accounts and synthesis tables. • Those were elaborated in a great detail which was allowed by the collection and the treatment of a great number of statistical and countable data from different sources. A system of the annual national accounts is operational. They are carried out annually and cover: • The balance of the goods and services; • Accounts of industries; • Accounts of the institutional sectors; • The supplies and uses table; • The integrated economic accounts table; • The financial transactions table;

6. The 2007 world financial crisis in USA affected the real activity of the Moroccan economy. The three large channels by which the first signals of this crisis were felt are the fast decelerations followed by recessions of the exports, the transfers of the abroad Moroccan community and the travel receipts of tourists, in spite of a favourable unemployment rate thanks to the role of agriculture and of a positive financial behaviour due to the financial system relatively well protected. • These indicators delivered the first signals of acute and persistent falls since the beginning of the year 2008, whereas the turndown of the GDP started practically until the fourth quarter 2008, due to a good agricultural campaign in this year, which is large delay given the extent of the crisis. Thus, estimating a flash GDP without agriculture would be a significant indicator to predict early crisis and sustain the economic growth . • So, strengthening the process of producing the flash GDP became necessary and currently an ongoing work is undertaken and will be forthcoming operational accordingly to the needs of the instruments of the policy making.

7. Actually, the quarterly GDP, as the best composite indicator, is released initially, by the National Institute of the conjuncture analysis (INAC), as a first estimate one month after the reference quarter (t), used as a leading indicator, relying on the series of the quarterly accounts available until the previous quarter, carried out by the National Accounts Institution, on the business confidence survey in the industrial and construction sectors, on partial operative data suitable and available in many economic branches and on modelling techniques. • In the same time, this institute releases the forecast for the next quarter (t+1). This GDP estimate is considered as leading indicator so it is not disseminated at a large scale, but only in the conjuncture report. • Then, the preliminary GDP is produced ninety days after the reference quarter, by the National Accounts Institution according to the SNA93, on the basis of the observations of this quarter not necessary finalised. Thereafter, the GDP is revised later when estimating the preliminary GDP of the next quarter and also at the time of the consistency with the annual accounts.

8. The estimate of the flash GDP (i.e. at t+45), according to SNA93, is an urgent purpose for us in order to follow up the financial and economic events within the shortest possible time. • Efforts are concentrated on targeting the adequate indicators, the data collection, and the extension of these accounts to other approaches (expenditure, institutional sectors, income)rather than only that of production. • Industrial production Index is currently becoming monthly in accordance with the requirements of the SDDS (Special Dissemination of Data Standards). • Quarterly consumer sentiment survey is operational, • Monthly Consumer price index and production price index exist since long-time. • Quarterly employment survey release data on employment by activities one month after the reference quarter.

9. Preliminary GDP from the production side is obtained by adding together value added of 30 branches of the economy at the basis prices plus net taxes on products and imports. The quarterly GDP is calculated at current prices, constants prices of previous year and linked prices with 1998 as base year. • Adopted methodology to compile the Quarterly National Accounts, by this the GDP, is the benchmarking method based on the mathematical techniques and econometric modelling based the regression approach to derive output and intermediate consumption using simple or composite coincident indicators having similar behaviour as the annual aggregate then calculating added value of the reference quarter. • These coincident indicators are initially adjusted seasonally and the components of cycle-tendency, seasonal and irregular performed separately after which a relation between these annualized indicators and the annual aggregate is estimated by econometric modelling methods.

10. On one hand, Moroccan economy is characterized by a great and volatile agricultural sector and an important underground sector influential in the economic activity. Unfortunately, they do not have short term indicators and thus a part of the fluctuations of the GDP remains unknown • On the other hand, the services sector become more and more extensive and strongly affects the fluctuations and the growth. However, there is no sufficient short term information which allows the follow-up and taking into account the movements related to these services. Except finances, communications, hotels and catering, and partially transport, the other market services are considered using synthetic or indirect indicators tied with the fields concerned, but, in the same time, able to contain some inadequacy and consequently not reflecting roughly the fluctuations of the targeted aggregates.

11. With the deficiency of indicators in many fields for instance rent, road transport, etc … several quarterly aggregates are determined by smoothing annual aggregates. Other indicators pose problem of the cash mode recording like the expenditure of the administrations, the taxes, the foreign trade, etc…, consequently the fluctuations of the GDP are likely to be skewed.