TheGlobalFinancial

Crisis
Article 1

"Weak" Moroccan Economy Insulatedfrom Global Financial Crisis

The Moroccan financial sector is safe from the shocks witnessed recently in the United
Statesand Europe,accordingto the director of the nation'scentralbank. Abdellatif Jouahrisaid the
Moroccan economy is less exposedto risk becauseit is less advancedthan the economiesof
developednations.

The financial crisis affecting the United States and other major world markets has analysts
concernedabout the health of the Moroccan economy..Abdellatif Jouahri,Governor of Bank Al-
Maghrib, Morocco's central bank, recently assuredthe public that Moroccan banks are not at risk,
though the economy could be harmed by the broader economic slowdown triggered by overser,"
financialmalaise.

Jouahristressedat a pressconferenceheld Thursday(September25th) in Casablancathat Morocco

has not been affected by the global financial crisis that began in earnestwith the bankruptcy of
American financial servicesjuggernaut Lehman Brothers Holdings Inc. Morocco is not vulnerable
to the global financial crisis, he said, becausethe nationls banking institutions cannot afford the
kind of activities that causedthe US collapse.

The Moroccan frnancial sector does not have assetsin overseasbanks facing diffrculties, Jouahri
said. Overseasassetsheld by Moroccan banks total just 31 billion dirhams, or 4Yo of total
resources,which he said is an insignificantratio.

The bank conductedan internal audit to assessthe institution'svulnerability, Jouahriseid, applying

a "control and risk analysisstrategy...hinging on the principle of selÊassessment
by units and their
extentof risk."

He said that the bank has re-examined its code of ethics and precautionary rules to strengthen
intemal procedures in a more volatile international economy. An international audit was also
conductedby the World Bank on the rules of pooling cashreservesin the Moroccan central bank.

Abdel Salam Al Sediki, professor of economics at the Mohammed V University in Rabat,

supportedthe bank directoCsassertionthat Morocco's economic weaknesswill largely insulate it
from the financial crisis.

"Our [financialJ scctor is still in its beginnings and its role is limited," he told Magharebia.
"Banking institutions are govemed by regulationsbecauseour economy is fragile." The country is
not immune to risk, howcver.

"Morocco shares several complex relations with international institutions," Al Sediki said. "The
financial sectorknows no nationality and binds countriesvia web-like interconnections."
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As a result,the professorsaid,it is inevitablethat growth rateswill declineas 2010 and 2012

approach.

"In France,a countrywith a strongeconomy,growth will be nearly l7o. Franceis a countrywith

whichwe share60% of our trade.Thus,our economyis boundto be influenced."

Oxford BusinessGroup (OBG), a UK institutionspecialisingin economicresearch,stressedthat

the Moroccan financial sector is not affected bv the turbulencein the internationalfinancial
markets.

OBG maintainedin a report recentlypublishedby Bank Al-Maghrib that the bank is pursuing
efforts aimed at building more flexibility into the banking system,despitethe global financial
disorderthat followedthe outbreakof the internationalcreditcrisis. I

Magharebia.com
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TheImpad of the Crisison Morocco

Despite efforts by the governmentand banking officials to downplay the count.y's risk o,
impact from the currentglobal economiccrisis, Morocco'sstock market has suffereda hit in recent
weeks.

Despitea low rate of foreign investmentin the CasablancaStock Exchange- estimatedat just 5%
- Moroccan stocksproved this week that they are not impervious to the financial crisis currently
shakingup world markets.

The Moroccan stock market has actually been in decline since mid-March, with the outbreak of the
mortgage crisis in the United States.However, real deterioration began in Septemberwith the start
of US bankingproblemsand their effectson the global financial system.

Total lossesin the Moroccan stock market since March amount to ll2billion dirhams or some
18% of the nation's GDP in 2007. More than 86 billion dirhams have been lost since early
Septemberas a result of the shocksin global'stock markets,reducingthe total capital of the stock
exchangefrom 666.73billion dirhamson Septemberlst to 580.5 billion on Tuesday(October 7th).

Moroccan officials have been careful to deny any link between the global financial crisis and the
Moroccan financial system.Jaloul Ayad, Director Generalof the Moroccan External Trade Bank
(BMCE), is of the opinion that the collapseof Moroccanstockswas due to psychologicalfactors.

"What took place here in the stock market in recent weeks was a case of panic among dealers in
Moroccan stocks," he said. "[Theyl were influenced by what they saw on TV as a result of the
Wall Streetcollapsvand its implicationsacrossthe world."

Ayad maintained that Moroccan banks are immunised against upheavals in the global banking
systembecauseof their weak foreign links. "Although our financial systemis open and liberal, our
banksdependon local resources- especiallyclient deposits- in re-financingtheir assets,"he said,
"unlike in somecountries,where banksdependon foreign funds to re-financetheir assets".

Attûariwafa Bank ChairmanMohammed Kettani also defendedthe solidity of Morocco's banking

system. "The global financial crisis is limited to very advanced financial instruments such as
mortgagesand derived financial products. Theseproducts don't even exist here in Morocco, where
banking servicesare still simple and basic," he said.As to the stateof mortgageloans in Morocco,
Kettani said, "Moroccan banks grant mortgage loans based on strict criteria that are based on
families' ability to save.The approvedrule is that the debt instalmentsdon't exceed 40Yoof farnily
income. Therefore,I don't see any risks in this respectas long as we control the r:r{.cof inflation
and interestrates."
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Morocco will be more affected by reductions in trade and foreign investment than by financial
decline becauseof the limited nature of the Moroccan stock market, said Ahmed Abboudi,
Director of the Moroccan Centre for BusinessConditions (Centre Marocain de Conjuncture, or
cMC).
According to Abboudi, the CMC expectsthe global crisis will lead to a I .5 to 2%odecline in short-
term growth. The group also expectsa related increasein inflation, to break 4.5% for the first time
in severalyears.

"I don't think Morocco will face any trouble in strict financial terms," he said. "However, the
aggravation of the global financial crisis, the speedof its spreadand its move from finance to the
economic circle will undoubtedly lead to shrinking world demand for Moroccan industrial
productsand seryices."

MqwassiLahcenfor Magharebiain Casablanca- 09/10/08

 The GlobalFinancial
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Key Vocabulary

Insulated y' om: protected,isolated.

Broader: widely diffrrsed.

To Trigger: to initiate a chain of events.

In earnest: in a seriousmanner.

Bankruptcy: inability to dischargeall the debts as they come

due.
Hinging: dependingon.

Volatile: tending to fluctuate sharply and regularly.

To downplay: to treat or speakof something so as to reduce

focus on its importance, strength or value.
Impervious: incapableof being influenced or affected.

Mortgage: a conveyanceof an interest in property as security

for the repaymentof money borrowed.
GDP: Gross Domestic Product. The total market value of
all the goods and services produced within the
borders of a nation during a specified period. (In French: pIB)

Upheaval: strong or violent changeor disturbance.

Loan: credit.

rnflation: a persistent' substantialrise in the general level

of prices related to an increasein the volume of
money and resulting in the loss of value of currencv.

Shrinking: reduction.

Lehman Brothers Holdings Inc: a corporation

governments and municipalities, institutional clients r
services in equity and fixed income sales, trading a
private investment management and private equiiy.
Banking and Investment Management.