Coronavirus 19 – Economic Impacts for Morocco

Ryan MaimoneBusiness in Morocco Podcast

The Coronavirus 19 is already having a significant impact on the global economy and we are only in the beginning of what will most likely become a worldwide pandemic. The global supply chain is being substantially disrupted since a very large percentage of raw, improved, and finished goods originate in China, South Korea, Japan, and Asia in general. 

For the last several weeks large sections of Asia have been on lockdown and/or seen industrial production and distribution halted. On February 17th, Apple warned that the Coronavirus outbreak would have a negative impact on second-quarter revenue due to “global supply chain constraints for iPhones and lower Chinese demand.” 

Today’s global economy is built upon the concept of “just in time logistics” meaning companies implement processes and procedures to reduce the levels of inventory across the supply chain. They do this because holding inventory costs money and reduces profits. For example, Toyota developed a system in which a large portion of their car parts arrived at the factory and were used within 1-2 days in order to limit the amount of inventory on hand.

Just in time logistics does save time, money, and improves overall efficiency, however, as we will see in the coming months, there can be significant negative second and third order consequences. 

Companies around the world, especially in Asia and Europe, are already seeing a disruption in receiving the raw goods and product inputs / parts that they need to operate their businesses. If China does not produce the raw goods or the parts needed to assemble and complete finished goods, car parts for example in Japan, then the disruption moves along the supply chain and ends with ruptures in stock and product shortages. 

This has already occured in many parts of the world with disposable medical masks, the demand is far exceeding the supply, and many countries, including Morocco, no longer have adequate supply. 

The impact on Morocco will soon be felt as retailers and distributors sell out of imported goods that are no longer being produced because workers are staying home or because community quarantines are in place. The good news for Morocco is that many of the essential items for life are produced in Morocco, for example; milk and dairy products, fruits, vegetables, nuts, chicken, beef, lamb, goat, fish, etc. The fact that Morocco is a producer of many of these essential daily items is going to help Moroccans better weather the coming economic storm.

Additionally, since Morocco’s economy does not rely on “just-in-time” logistics (even IKEA is constantly having supply disruptions in to Morocco) companies in Morocco tend to make large orders and keep relatively large stocks of items knowing that the next shipment will have an uncertain arrival date. It’s very easy to see this in stores like Carrefour or Marjane where they will have large quantities of a product for several weeks and then be out of stock for weeks or months after that. 

The greatest risks for Morocco are disruptions in the energy market, if gasoil or butagas become scarce then the economy will definitely be damaged. Additionally, if the supply disruptions last for many weeks or months we may see shortages in Morocco of consumer goods like soap, clothing, electronics, cleaning supplies, and other imported goods, especially from Asia and Europe.

Given these supply chain disruptions, it would be wise to stock up on essential household items like non-perishable food items, bottled water, juice, hand sanitizer, cold medicine, toiletries etc in case there is an extended disruption in the supply chain that brings goods to Morocco. 

When the Coronavirus does come to Morocco, and many experts believe that no country will be spared, the economy will slow down for several weeks or months (won’t be much different than the months of Ramadan or August) but it will recover and likely do better than other countries in the world that rely heavily on just-in-time logistics and foreign imports of basic daily necessities.

International Morocco
International Morocco
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