In parliamentary elections this month Morocco’s ruling moderate Islamist party, the Justice and Development Party (PJD), won the largest number of seats in parliament’s lower house. It secured 125 out of the 395 seats, the highest share of seats ever won by any political party in Moroccan history. Nevertheless, the Party of Authenticity and Modernity (PAM), which was founded by a close political confidant of King Mohammed VI and is the main rival of PJD, provided the biggest surprise as it secured 102 seats compared to 47 in 2011. Under Morocco's election system, no party can win an outright majority, which forced PJD into negotiations to form a coalition government. Prime Minister Abdelilah Benkirane of PJD, in office since 2011, managed to secure the support of the Independence Party (Istiqlal) and the Progress and Socialism Party. This is likely to be enough for a working majority.

Impact on country risk

Over the past five years, PJD has focused on the economy. It has been cutting subsidies and reforming the pension system for the public sector. It has also overhauled a cumbersome subsidy system and frozen government hiring. As a result, the country’s fiscal deficit dropped from 6.6% of GDP in 2011 to an expected 3.5% this year. In addition, the country has narrowed its current-account deficit to a small deficit of 1.2% of GDP in 2016, while a deficit of 7.9% of GDP had been posted in 2012. However, a drought has hit the economy hard. Economic growth is expected to be only 1.8% in 2016, while unemployment remains stubbornly high. In the run-up to the elections, PAM had vowed to reverse some PJD policies. Both party’s increased share of votes in the elections indicates how deeply divided Morocco has become over the pace and scope of reforms. The policy agenda of the new coalition government is unlikely to differ significantly from the previous and will remain focused on cutting public expenditure. Reducing corruption, another PJD priority, is high on the agenda as large-scale protest recently erupted after a fisherman was crushed in a rubbish truck while trying to retrieve swordfish confiscated by the police. The protests - rare in Morocco - are aimed against local corruption, police violence and the business-political elite surrounding the King who controls the police force. As such, the dismissal of some officials is likely but structural change is expected to be blocked by the palace elite. Indeed, real power lies firmly with the royal court and is unlikely to be undermined by the unrest.

Analyst: Jolyn Debuysscher, j.debuysscher@credendogroup.com