Morocco and Tunisia’s CDS history to date continues to reiterate the market’s notion that Maghreb’s geopolitical backdrop and macro fundamentals are more or less indistinguishable even though hitherto (a) one underwent a full fledged revolution and the other’s demonstrations look tame in comparison (for now?) and should lead to certain reforms; (b) sharp declines in both industrial production and tourist arrivals (6% of total domestic output) underscore a likely -0.5 y/y 2011 real GDP contraction (and the associated decreased direct and indirect tax receipts) in Tunisia (versus +4.1% in Morocco, where growth indicators, rather, including credit growth have remained intact throughout the year) as well as a widening of the former’s CA deficit (6.2% forecast from 4.8% in 2010), an uptick in inflation (4.8% forecast versus 4.4% last year and 2.8% projected for Morocco) and a downturn in reserves (whereas thus far sticky FDI flows, at 2.5% of GDP, should allow Morocco to grow theirs to roughly 1/4 of nominal GDP, versus ~15.9% for Tunisia).
That said both countries remain vulnerable to both EU oriented trade and investment ties (54% of exports and 86% of remittances, per Morocco, and a similar relationship for Tunisia though a higher export percentage) as well as to other exogenous shocks; Barclays noted for instance that the external financing needs of the region’s oil importers (i.e. Egypt, Lebanon, Syria, Tunisia, Morocco and Jordan) “will exceed USD165bn for 2011-13, and, over the same period, their fiscal financing needs amount to another USD145bn, without taking into account the implications of their post-transition reform agendas. In a recent report prepared for the G8 meeting, the IMF states much of this financing gap will need to come from external financial support by the international community because it expects private debt and capital markets to remain cautious towards countries in the region, increasing their risk premium and their cost of borrowing.” At least one commentator bemoans the phenomenon, arguing that too much aid perversely “will hobble the Arab spring”, while debt sustainability measures (i.e. public debt to GDP ratios) aren’t trending down like they are in, say, Lebanon. Yet as economist John Sfakianakis duly noted last week in reference to the GCC’s recent outreach “the economic benefits of accession favour the two prospective entrants” such that it may be fair to say that at least one main driver of inflation in Morocco could be tempered going forward (and not a moment’s too soon per global wheat prices). With all of this in mind interestingly Moroccan z-spreads on euro denominated, 2020 paper have widened versus Tunisia comparable credit since late January and have failed to correct despite CDS convergence over that same period; in highlighting the discrepancy and in accordance with the above analysts note Morocco’s “comparatively stable political situation and solid economic performance and external position contrasts with the growing uncertainties in Tunisia.”