Morocco is still on target to grow five per cent this year despite an expected impact on tourism and foreign investment from unrest in North Africa, the economic affairs minister said in an interview on Wednesday.
"Of course the changes that are happening here in the region will have an impact in some areas," said Nizar Baraka. "The first impact is in foreign investment, the second area is tourism."
Protest movements in Tunisia and Egypt have prompted their leaders to resign and sparked an armed conflict and international military intervention in Libya.
Both Morocco and its neighbour Algeria have seen stepped up demonstrations, although Morocco's king has announced a constitutional reform to give more power to parliament and strengthen the judiciary.
In response to the protests, Rabat also boosted subsidies for items such as wheat, sugar, gas and oil by 15 billion dirhams in addition to the to the 17 billion dirhams already allocated in the 2011 budget.
"It is very important to maintain the purchasing power of people," Baraka said, adding the government was making greater efforts to target help to the country's poorest as well.
He said subsidies make up a total of four percent of gross domestic product, slightly more than the North African country's projected 3.5 per cent of GDP budget deficit this year.
Morocco expects to be able to afford the higher subsidies without driving up its deficit by increasing revenue as well as achieving greater efficiencies in running the state, the minister said.
"Our deficit for this year, thanks to the increase of the receipts, will give us the opportunity to maintain the deficit at 3.5 per cent of GDP," he said.
In addition, the government is planning to buy hedging contracts for oil to reduce the volatility of price swings.
"It's the first time we will do it," Baraka said. "We will do it in some big banks....it's an insurance."
Although turmoil in North Africa threatens regional economies in the short term, in the longer term greater democracy would boost Morocco's economy by two per cent by fostering more trade and investment.
"If we go for democracy in the Arab world, I can say it will be a big opportunity for Morocco to have -- and the king has worked for it -- an economic integration," the minister told Reuters.
Opening borders with Algeria would increase trade and offer scope to improve boost gross domestic product, possibly by some two percentage points, he said.
"We can attract more foreign investment, because the market will be more important, about 100 million people," he said. "And we will have an increase of 16-17 per cent revenue per capita."
Baraka said Morocco would not face upheaval as in other Arab nations, but change gradually. "If we talk about an Arab spring, we can talk about a Moroccan summer," he said.