After a decade of prosperity, Morocco is suffering the knock-on effects of the debt crisis in Europe, its largest trade partner, cutting growth forecasts as prices rise and social discontent simmers.
Depressed revenues from the key tourism sector, a slowdown in foreign investment and remittances from Moroccans working abroad, and a widening trade deficit are among the mounting economic woes facing the North African country.
A harsh drought has also badly affected agricultural output this year, which along with a 20 percent rise in petrol prices has driven up the cost of food.
Reflecting the lingering discontent, thousands took to the streets of Rabat on Sunday, after months of relative calm, chanting slogans criticising the Islamist-led government and protesting against unemployment, high prices and corruption.
Similar demonstrations were held in Casablanca, Morocco's largest city and economic capital.
The World Bank, in a report published in June, said around 30 percent of Moroccans aged between 15 and 29 -- who account for 44 percent of the working age population -- were unemployed.
And central bank Governor Abdellatif al-Jouahri last month lowered the growth forecast for 2012, to less than three percent from the 4.2 percent forecast in the budget.
But on Monday, Finance Minister Nizar Baraka downplayed the worrying economic figures, pointing instead to a five percent growth rate over the past 10 years and insisting Morocco's competitiveness and stability made it part of the solution to Europe's problems.
Normally "when Europe sneezes, Morocco gets a cold. But now Europe has a cold and Morocco is far from being sick," Baraka told a conference in Casablanca.
Morocco's per capita income, he said, rose between 2001 and 2011 from 15,700 dirhams (1,430 euros) to 26,151 dirhams (2,382 euros), accompanied by a fall in the rate of unemployment to 8.9 percent in 2011 from 12.5 percent in 2001.
The country has also mostly been spared the unrest that swept North Africa last year, toppling the leaders of Tunisia, Egypt and Libya.
King Mohammed VI managed to contain the protest movement by introducing significant reforms to curb his near-absolute powers, culminating in November elections that saw a moderate Islamist party win most seats and head a coalition government.
The finance minister acknowledged that fluctuating global commodity prices were a threat to the Moroccan economy, which lacks hydrocarbon reserves of its own and depends heavily on oil and grain imports.
European head winds"Above all, Morocco must deal with the vulnerability of its economy ... to the strong volatility in the price of raw materials," he said.
The central bank, in a report earlier this month, said the trade deficit in the first half of 2012 rose 7.1 percent on the same period last year, to hit 100 billion dirhams (9.1 billion euros).
It blamed the high price of energy and raw materials for rising import costs, while Europe's economic malaise has weighed heavily on exports and remittances from Moroccans working abroad, according to the bank.
Meanwhile, the budget deficit could remain as high as six percent of GDP this year, the central bank noted, after reaching that level last year, a record caused in part by growing subsidies, notably on food.
The government splurged on subsidies in 2011 as it sought to defuse the growing protest movement, but was forced to reduce fuel subsidies last month to lower the deficit.
Much-needed foreign help is in short supply.
Foreign direct investment has fallen in the past two years, although the kingdom will continue to benefit from previous investments, such as the giant low-cost car factory near Tangiers that Renault inaugurated in February.
The tourism industry, which previously generated around 15 percent of GDP, has also suffered heavily.
But the state has forged ahead with major infrastructure projects, of the kind capable of transforming emerging economies, including the Arab world's first high-speed railway, urban tramways and a massive port project.
And the phosphate industry, which accounts for nearly a third of exports, is proving resilient.
Salah Haroun, an economist, voiced cautious optimism that Morocco would remain largely unscathed.
"The crisis in Europe has impacted on us and its deterioration risks further affecting economic activity in Morocco. But for several years the country has implemented reforms, which are helping it to withstand the fallout," he said.