The economic consequences of the earthquake in Morocco

On the night of September 8 to 9, 2023, Morocco experienced its largest natural disaster in modern times, an earthquake of magnitude 7 on the Richter scale, a level higher than the Agadir earthquake of 1960

The economic consequences of the earthquake in Morocco

On the night of September 8 to 9, 2023, Morocco experienced its largest natural disaster in modern times, an earthquake of magnitude 7 on the Richter scale, a level higher than the Agadir earthquake of 1960. The entire region of Haouz, the city of Marrakech and the mountainous hinterland were particularly affected.

As things stand, the human toll stands at 3,000 dead and more than twice as many injured. Some 50,000 homes are said to have been destroyed, with some villages completely reduced to rubble. Many roads are unusable. Around thirty historical monuments – village granaries, ksours, mosques – were destroyed or heavily damaged. This is the case of the Tinmel mosque, in Talat N'Yaqoub, symbol of the Almohad dynasty, which was under restoration. This is also the case for the collective granary in the village of Aït Ben Haddou, which is now partially in ruins.

The damage extends over a large territory, made up mainly of poor rural areas. They are currently estimated at around €10 billion, or 8% of the country’s GDP. This may seem considerable, but these figures must be compared with transfers from Moroccans abroad, which amount to an equivalent sum – 11 billion in 2022.

Furthermore, Morocco has foreign exchange reserves amounting to 35 billion euros. Essential infrastructure, notably the Marrakech airport and train station, was not impacted, and most industrial activities, which are located in regions far from the earthquake, were spared. Thanks to its development, Morocco is therefore able to cope with this earthquake, especially as it is accompanied by very strong public and private solidarity.

After the Covid period, Morocco experienced a clear increase in tourist arrivals, in a movement to catch up with the situation before the pandemic. In the first half of 2023, these entries saw a spectacular increase of 92%, which was expected after two particularly difficult years.

This is all the more important as the area hit on the night of September 8 to 9, namely the Haouz region and the city of Marrakech, is the most touristy in the country. If tourism represents 7% of Moroccan GDP, this ratio is much higher in the Marrakech region, which does not have many industries and which survives mainly on revenues from tourism. Many inhabitants of the hinterland and the Atlas also make a living from the crafts generated by tourism, in particular the making of carpets, baskets and others.

However, it is likely that the earthquake will not have a major impact on tourism. Even if it somewhat delays the ongoing catch-up, the damage in the city of Marrakech is minimal and mainly affected part of the medina. Historic buildings and, in particular, the Koutoubia minaret were spared.

Some hotels or riads deplore cracks and must carry out assessments to guarantee the safety of the buildings, but very few will be forced to embark on large-scale consolidation work. For the most part, the capacity of Marrakech's infrastructure is preserved and life is normal in the city. In fact, the number of tourist cancellations remains very limited to date, even if the last quarter of 2023 will be less good than expected.

In the hinterland the situation is different. Some villages are destroyed and infrastructure will be affected for a long time. But these are secondary tourist sites in terms of their attendance, even if the income generated is substantial for the local populations.

However, one point is worth emphasizing. The consequences for the poorest in rural areas will be all the more difficult to bear as risk coverage systems are currently not well suited to their situations. There is in fact a regime of coverage against the consequences of catastrophic events (EVCAT), which aims to compensate victims for bodily and/or material damage resulting from natural disasters.

Law 110-14 sets up a mixed compensation system which includes an insurance component and a benefit component. Those who have a comprehensive home insurance contract, an automobile contract or personal injury insurance can contact their insurance company. But the contract still needs to actually include EVCAT protection. However, this system dates from 2020 and, according to the information guide of the Insurance and Welfare Control Authority (ACAPS), “the insertion of the EVCAT guarantee concerns contracts taken out or renewed since the entry in force of this regime”. EVCAT therefore only concerns a reduced number of contracts. Furthermore, and this is the most essential point, most victims do not have a contract, particularly in rural areas.

For those who do not have an insurance contract, there is a solidarity fund against catastrophic events which covers bodily injury and loss of primary residence. It is financed by a contribution on insurance contracts. But an order from the head of government, published in the Official Bulletin within a maximum of three months after the occurrence of the catastrophic event, is required to activate this regime. This order must specify the disaster area, the date of the event, and the duration of the catastrophic event.

Furthermore, activating the regime is not enough. Indeed, compensation linked to bodily injury is determined by incapacity or death. The first must be established by a doctor practicing in the public sector and the second by providing the death certificate. All this assumes that victims can easily contact the administrations concerned, which is not the case in rural areas. The reference capital which serves as a basis for calculating compensation depends on the victim's salary or income. This income must naturally be documented by supporting documents. However, most people in poor areas do not have an income and, if they do, the documents are probably buried under the rubble.

Regarding compensation for loss of main residence or loss of use, things are also complicated for the poorest. The allowance for loss of use is set at six times the monthly rental value, determined by a committee of experts and supervised by the administration after consulting the ACAPS. The compensation request is based on an expert report drawn up by the expert committee. If the file is accepted, the solidarity fund notifies the compensation proposal to the applicant, by registered letter with acknowledgment of receipt or extrajudicially.

Here we can see the difficulty of the procedures for the poorest who are not always able to understand and even read administrative documents in completely destroyed villages, who may also have no home or even an address.

We see it: the measures put in place to compensate victims risk being aimed primarily at urban populations, holders of insurance contracts for partial damage to their home or vehicle. The poorest in rural areas, who are also the most impacted, therefore risk remaining outside the systems put in place. This is why we must hope that the Special Fund created on royal instructions will be able to really address the poorest, and that certain organizations will provide support in the process.

Let's end on a note of hope. The crisis can have positive effects. By focusing attention on the very rich material heritage of the region and on the precarious situation of the populations, a reconstruction of infrastructure in rural areas could be accompanied by new sustainable tourism strategies, including cultural elements which would be likely to diversify the tourist offer. The consequences will ultimately depend on Morocco's ability to transform the ordeal into an opportunity.

Jean-Yves Moisseron is a socio-economist, IRD/HDR research director, Development Research Institute (IRD)