Morocco flag Morocco: Economic and Political Overview

The economic context of Morocco

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

In recent years, the Moroccan economy has been characterised by macro-economic stability and low levels of inflation, relying mostly on exports, a boom in private investment and tourism. However, the COVID-19 shock has pushed the Moroccan economy into its first recession since 1995. The country’s economy rebounded in 2021 when it grew an estimated 5.7% thanks to a base effect and an extraordinary performance of the agricultural sector, rather than by a broad-based acceleration of economic activity (the service sector was still weak, pulled by the underperformance of Morocco’s relatively large tourism industry). GDP is expected to return to its pre-pandemic level by 2022, with the IMF forecasting growth of 3.1% this year and 3.7% in 2023, albeit this baseline scenario is subject to high uncertainty especially due to the ongoing global sanitary crisis, which prompted the closure of the country’s borders at the end of 2021.

Current expenditure on health and social protection saw a sharp increase in order to counterbalance the effects of the pandemic, thus halting the fiscal consolidation efforts undertaken by the national government in recent years. The budget deficit was estimated at 5.6% in 2021, and it is projected to decrease marginally to 5.3% this year and 4.9% in 2023, respectively, as a result of the GDP rebound. Similarly, the debt-to-GDP ratio climbed to 75.8% in 2021 (from a pre-pandemic level of 65.1%), and is expected to remain substantially stable around 76.6% over the forecast horizon (IMF). In order to support enterprises and individuals recovering from the impact of the coronavirus, the government set up a strategic investment fund worth USD 4.8 billion, as well as other measures to help people working in the informal sector, the issuance of partial guarantees to banks for loans granted to firms, a reduction in the Central Bank’s benchmark interest rate by 75 basis points (to a historically low 1.5%), and direct injections of liquidity into the financial system. Furthermore, the country secured good access to external finance, with large multilateral disbursements and two successful sovereign bond sales that reinforced foreign reserves. Inflation picked up to 1.4% in 2021 amid rising global energy prices and should decrease only slightly in 2022 before accelerating again the following year (1.2% and 1.6% - IMF).

Albeit its high levels, the unemployment rate had been declining in recent years; however, the spread of the pandemic prompted a surge, with unemployment estimated at 12% at the end of 2021 (from 10.2% before the pandemic), despite the government’s effort to support the economy. In a very unstable global context, the IMF forecasts the unemployment rate to gradually decrease to 11.5% this year and 11% in 2023. According to the Moroccan Higher Planning Commission, unemployment particularly affects the youth (15-24 years of age – at 26%) and recent graduates. The rate of poverty remains one of the highest in the Mediterranean region, with 15% of the population living under the poverty line.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 119.87e114.60126.04132.65140.72
GDP (Constant Prices, Annual % Change) 2.6-6.35.73.13.7
GDP per Capita (USD) 3,3683,188e3,4713,6173,801
General Government Balance (in % of GDP) -3.8-5.3e-5.6-5.3-4.9
General Government Gross Debt (in % of GDP) 65.175.4e75.876.676.6
Inflation Rate (%) 0.20.61.41.21.6
Unemployment Rate (% of the Labour Force) 10.212.212.011.511.0
Current Account (billions USD) -4.41-1.68e-3.87-4.32-5.38
Current Account (in % of GDP) -3.7-1.5e-3.1-3.3-3.8

Source: IMF – World Economic Outlook Database, October 2021

Note: (e) Estimated Data

Main Sectors of Industry

Given the richness of Morocco's soil, the economy is dominated by the agricultural sector, which employs nearly 33.2% of the workforce and contributes to 11.7% of GDP (World Bank, latest data available). Barley, wheat, citrus fruits, grapes, vegetables, argan, olives, livestock and wine are the country's main crops. In recent years, the government has focused on this sector, through its "Green Morocco Plan" and the Agricultural Development Fund. The sector performed well in 2021: according to official sources, 2021 wheat production was estimated at almost 7.2 million tonnes, about 50% above the average and almost three times more than the drought stricken harvest in 2020; barley output in 2021 is estimated at 2.6 million tonnes, almost four times the amount harvested in the previous year; at 10 million tonnes, the 2021 cereal production exceeded the five year average by more than 60%. The country’s cereal production is highly variable, with local dams providing irrigation for only 15% of the agricultural land and rainfed agricultural production accounting for 85% of the aggregate output (FAO).

Morocco has a relatively small amount of mineral resources, phosphates being its main source of wealth. Industry contributes 26.1% of the GDP and employs 23% of the workforce. The main sectors are textiles, leather goods, food processing, oil refining, and electronic assembly. However, new sectors have been booming: chemistry, automotive parts, computers, electronics and the aerospace industry. The automotive industry, in particular, has been growing in the last decade, with double-digit annual growth in terms of job creation and exports (becoming the country’s main exporting sector and Africa’s main automotive hub). The emergence of new industries should allow the country to reduce its dependence on the agricultural sector. Morocco’s industrial sector is the largest beneficiary of foreign direct investment.

The services sector accounts for slightly above half of GDP and gives employment to 43.6% of the workforce. It is spearheaded by real estate and tourism, which has been very dynamic in recent years (accounting for around 11% of GDP and hitting a record of nearly 13 million arrivals in 2019). Nevertheless, tertiary activities recorded a downward trend following the outbreak of the COVID-19 pandemic, with a particularly weak tourism performance: according to the latest official figures, in the first eight months of 2021, the number of tourism revenues decreased by 61.5% compared to the same period in 2019.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 33.3 23.1 43.7
Value Added (in % of GDP) 12.2 25.3 51.2
Value Added (Annual % Change) -7.0 -5.6 -7.4

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
63,3/100
World Rank:
81
Regional Rank:
9

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
5.48/10
World Rank:
61/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

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Latest Update: June 2022

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