OFFICIAL USE

Morocco diagnostic
2023

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 OFFICIAL USE

Country diagnostics are an EBRD tool for identifying the main obstacles to entrepreneurship
and private-sector development and for shaping the Bank’s strategic priorities and project
selection in new country strategies. Each diagnostic informs the EBRD’s policy engagement
with national authorities.
Each country diagnostic assesses the progress and challenges of the EBRD investee economy in question with
regard to developing a sustainable market economy. Private-sector development and entrepreneurship are at the
heart of the Bank’s mandate in the regions where it operates, but the private sector in all EBRD economies faces a
range of problems and obstacles. The diagnostic highlights the key challenges facing private companies, shows
where each country stands relative to its peers in terms of the Bank’s six transition qualities – competitive, well
governed, resilient, integrated, green and inclusive – and notes the main deficiencies and gaps in each quality.
The diagnostics draw on a range of methodologies and best practices for assessing how big the various
obstacles are. Extensive use is made of in-house expertise across the EBRD, along with surveys such as the
Business Environment and Enterprise Performance Survey (BEEPS) and the Life in Transition Survey (LiTS), as well
as other cross-country surveys and reports from institutions such as the World Bank, the World Economic Forum
(WEF) and the Organisation for Economic Co-operation and Development (OECD). For some of the larger countries,
the diagnostics draw on specially commissioned studies of selected issues critical to private-sector development.
The EBRD’s Country Economics, Strategy and Policy team leads the diagnostic process, drawing substantially on
the expertise of sector, governance and political experts in the Policy Strategy and Delivery department (PSD) and
consulting widely with relevant experts across the Bank when preparing the final product. The diagnostics are
shared with the EBRD Board during the country strategy process and published during the public consultation
period.
The views expressed in the diagnostic papers are those of the authors only and not of the EBRD.
For more information, go to https://www.ebrd.com/publications/country-diagnostics.

Alexa Tiemann (Lead Regional Economist for the southern and eastern Mediterranean (SEMED) region in the Policy Strategy and Delivery (PSD) department of the
EBRD), Bassem Kamar (Former Lead Regional Economist, SEMED, PSD) and Rafik Selim (Principal Economist, SEMED, PSD) prepared this report. We are grateful for
the guidance and comments provided by Mattia Romani (Former Managing Director, PSD), Artur Radziwill (Director, Country Economics, Strategy and Policy) and Peter
Sanfey (Deputy Director, Country Economics, Strategy and Policy). We are also grateful to numerous colleagues in PSD for their helpful contributions, including Asma
Akremi, Eva Bernard, Yewon Choi, Damin Chung, Alejandra Cordero, Federica Foiadelli, Guy Henley, Cherry Khalil, Maxime Meftah, Tarek Osman, Bojana Reiner, Lamia
Rhoufrani, Matthieu Riolacci, Anna Sali, Levent Tuzun, Jaeyoung Wee and Susanne Wischnath. The report has benefited from comments by EBRD colleagues in other
departments, including Banking (Antoine Salle de Chou), the Office of the Chief Economist (Philipp Paetzold), Green Economy and Climate Action (Abderrahim Assab,
Mirjana Grkovska, Cem Gundogan) and Capital Markets Development (Fady Alrayyes). Editor: Poilin Breathnach. The report builds on the joint EBRD-European
Investment Bank (EIB)-African Development Bank (AfDB) report on Morocco, published in September 2021. The report is largely based on data available as of August
2021, although selected numbers were updated in 2023.

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Contents
Executive summary ______________________________________________________________________ 4

1. The operating environment __________________________________________________________ 5

1.1. Morocco’s political economy has been conducive to significant reform in recent years_________________ 5

1.2. Morocco’s post-pandemic recovery and faster economic growth will require a renewed reform dynamic __ 5

2. Economic competitiveness and inclusive and sustainable growth will be essential to accelerate
development____________________________________________________________________________ 6

2.1. The private sector would benefit from diversification in several respects ____________________________ 6

2.2. Growth will have to become more inclusive for women, young people and rural regions _______________ 9

2.3. Key reforms will be needed to implement the country’s green economy transition ambitions __________ 10

References ____________________________________________________________________________ 12

Annex I. Qualities of a sustainable market economy __________________________________________ 15

Competitive [ATQ = 4.33]__________________________________________________________________________ 16

Well governed [ATQ = 5.83] ________________________________________________________________________ 18

Green [ATQ = 5.16] ______________________________________________________________________________ 20

Inclusive [ATQ = 4.18] ____________________________________________________________________________ 22

Resilient [ATQ = 4.83] ____________________________________________________________________________ 24

Integrated [ATQ = 5.15] ___________________________________________________________________________ 26

Annex 2: ATQ scoring methodology _________________________________________________________ 28

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Executive summary
In 2021, Morocco outlined its vision and growth targets in a New Development Model (NDM) centred on four
pillars of development.1 They are: (1) a productive and diversified economy that creates value-added and quality jobs;
(2) enhanced human capital that is better prepared for the future; (3) opportunities for the inclusion of all and stronger
social cohesion; and (4) resilient regions and sustainable land use. These priorities chime with the key findings of a
joint private-sector development report published by the European Bank for Reconstruction and Development (EBRD),
the European Investment Bank (EIB) and the African Development Bank (AfDB), which focused on private-sector
competitiveness, access to finance, rural development and global integration.2 This country diagnostic builds on those
findings, while taking into account more explicitly the challenges surrounding economic inclusion for women and
young people, as well as the importance of promoting the green transition – also in line with the country’s NDM.
Morocco has implemented significant reforms over the past decade and maintained a solid macroeconomic
environment, but growth has decelerated more recently. Its political economy has been conducive to doing
business and it has climbed significantly in international rankings such as the World Economic Forum’s Global
Competitiveness Report.3 Solid macroeconomic policies have ensured a stable environment with well-managed
public finances and moderate debt levels. However, growth has relied on a small number of key sectors that have
attracted significant foreign direct investment (FDI) inflows, but which have not brought along small and medium-
sized enterprises (SMEs) as a key driver of economic inclusion. Consequently, growth has slowed to around 3 per
cent in recent years and the private sector will require a renewed boost to become a more broad-based driver of
growth and job creation.
As a productive and diversified economy that creates value-added and quality jobs, the country requires more
integration into global value chains, including for SMEs, as well as improved access to finance. Morocco has
become a hub for key sectors such as automotive and pharmaceuticals, but this has generated few benefits for
local SMEs. The role of state-owned enterprises (SOEs) further skews the environment for private enterprise. SOEs
account for two-thirds of public investment and close to 10 per cent of gross domestic product (GDP). About 28 per
cent of Moroccan companies report access to finance as a major constraint on their operations. Key reforms should
focus on improving access to finance through a more diversified financial sector and deeper capital markets;
reducing red tape and corruption; and promoting a more level playing field that closes the gaps in opportunities
between outward-oriented sectors and SOEs on the one hand and local SMEs on the other.
Promoting economic opportunities for all will require more support for women and young people, as well as
investment in rural regions. Youth unemployment is high, at 22.1 per cent in 2020, while female labour
participation is among the lowest in the Middle East and North Africa (MENA) region (despite reforms to promote
gender equality) and rural regions remain largely dependent on agriculture. Moroccan students perform worse than
many of their peers on standardised test scores, translating into a broad skills mismatch with the labour market.
Greater access to education, including practical skills and entrepreneurship, could help underserved groups to
catch up. In addition, digital finance could support financial inclusion and help to leverage the growth contribution
of the country’s burgeoning labour force. Lastly, although Morocco’s transport infrastructure is relatively good
around the main cities, more remote areas are less connected. Economic agglomeration and opportunities in
lagging regions will require investment in infrastructure and schooling.
Morocco has committed to some of the most ambitious green transition targets, but reforms are needed to
lower its energy intensity and emissions and to manage water scarcity. The country has significant potential for
investments in renewable energy, but further structural reform would boost the attractiveness and efficiency of the
sector. Amid rising energy demand from households and industry, additional measures to bring down energy
intensity and emissions are required, including by mainstreaming green considerations into investments to expand
infrastructure. Moreover, the country’s water resources are under pressure; this could be mitigated by the uptake of
new water-focused technologies and resource management practices (notably in agriculture).

1 See CSMD (2021).

2 See EBRD, EIB and AfDB (2021).
3 See WEF (2019).

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1. The operating environment

1.1. Morocco’s political economy has been conducive to significant reform in recent years

Morocco’s political economy continues to foster economic reform and allows the private sector to grow. The
government is parliamentary, thus representative. Over the past decade, successive governments have undertaken
tough reforms in various areas, which have strengthened the country’s macroeconomic resilience and improved the
business environment. These include plans to upgrade infrastructure and significant steps to diversify the economy
through industrial policy.
However, economic growth has not been enough to fulfil the population’s welfare aspirations, sparking the
launch of the NDM in May 2021. Despite successful reforms in recent years, economic growth has started to slow
and its benefits have not been equally distributed. Significant regional disparities remain, many young people enter
the job market but cannot find employment, and female labour-force participation is among the lowest in the MENA
region. The Special Commission on the Development Model comprised a broad range of prominent stakeholders
from the government, the private sector, academia and civil society. The NDM envisages a prosperous, skilled,
inclusive, sustainable and bold Morocco through (1) a productive and diversified economy that creates value-added
and quality jobs; (2) enhanced human capital that is better prepared for the future; (3) opportunities for the
inclusion of all and a stronger social bond; and (4) resilient regions and sustainable land use. These key pillars have
significant overlap with the key obstacles to economic growth that the EBRD identified in the diagnostic report on
private-sector development it undertook with the EIB and AfDB.4

1.2. Morocco’s post-pandemic recovery and faster economic growth will require a renewed reform dynamic

Economic growth in Morocco has been strong over the past two decades, but this had started to slow before
the Covid-19 pandemic. Growth remains dependent on agriculture. Prudent macroeconomic policy and political
stability have sustained economic activity over the past two decades, with average annual growth exceeding 4.1 per
cent in 2000-19. However, growth slowed in the five years leading up to the pandemic, averaging 3.2 per cent,
constrained by low agricultural output and delays in diversification. Despite the importance of high-value-added
services (such as tourism) and export-oriented industrial activity (such as the automotive sector) to GDP, SMEs
have struggled to participate in these value chains and growth remains reliant on agriculture.
Following a strong post-pandemic recovery in 2021, Morocco’s growth decelerated in 2022, as poor weather
conditions depressed agricultural output. GDP initially rebounded to 7.9 per cent in 2021, after contracting 7.2
per cent in 2020, as Morocco benefitted from the relative success of its vaccination campaign5 and the faster
reopening of the economy. However, the economy recorded a modest 1.3 per cent growth rate in 2022, driven by a
drought-induced contraction in the agricultural sector and a slowdown in non-agricultural activities. Because of
Morocco’s dependence on food and energy imports, the economy felt the impact of the war on Ukraine, as inflation
accelerated to an average 6.6 per cent in 2022 and peaked at 10.1 per cent in February 2023, before starting to
ease.
Morocco has managed to reduce its external and fiscal imbalances in the past few years through solid fiscal
management, financial oversight and subsidy reforms. The country is making good progress on its target to replace
across-the-board subsidies on all products by 2024 with a unified targeted compensation mechanism, which will be
based on a national population register, a centralised social register and the assignment of a unique identification
number to all nationals to better target transfers. Despite higher inflation and spending to contain the economic
impacts of inflation for households, the fiscal deficit declined to 5.1 per cent of GDP in 2022. Although public debt
increased to 69 per cent of GDP, it remains under control and well managed. On the external side, the current-
account deficit widened to 4.3 per cent of GDP in 2022 as the rise in imports (mostly food and energy) outweighed
the increase in exports, tourism receipts and remittances. Nevertheless, the current account deficit remains
sustainably financed and the country’s foreign-exchange reserves are large and stable (covering almost six months
of imports).
A modest recovery is expected in 2023, thanks to a good harvest, easing inflation and a relative pickup in
domestic and external demand. Downside risks remain, however. Growth picked up to an average 3.4 per cent
annually in the first half of 2023 and is expected to record 3.1 per cent by the end of the year, as the agriculture
and non-agriculture sectors continue to expand. In the medium run, growth is likely to revert to pre-pandemic levels

4 See EBRD, EIB and AfDB (2021).

5 Some 63.5 per cent of the population had been fully vaccinated as at 5 December 2021, the fourth-highest level of all the economies in which the
EBRD invests, based on Johns Hopkins University data.

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of around 3 per cent, with accelerated reform momentum potentially improving the outlook further. Nevertheless,
Morocco’s high dependence on energy imports and seasonal agricultural production increases its vulnerability to
global instability and climate risks. Downside risks include increases in commodity prices, worsening global
conditions, lower demand from Europe and tighter monetary conditions. On the positive side, the country entered
into a two-year US$ 5.0 billion (around €4.7 billion) Flexible Credit Line (FCL) programme with the IMF in April 2023
to build external buffers and provide insurance against risks, enabling the country to develop the necessary policy
space and accelerate the implementation of its comprehensive reform agenda, as set out in the NDM.

2. Economic competitiveness and inclusive and sustainable growth will be essential to

accelerate development

2.1. The private sector would benefit from diversification in several respects

Morocco’s stable political and macroeconomic environment over the past two decades has allowed it to
benefit from one of the best investment climates in Africa. Morocco now compares and benchmarks its
performance and objectives with more advanced economies in central and eastern Europe. In the World Economic
Forum’s Global Competitiveness Report, its score (60, ranked 75th out of 141 countries) lags only that of Jordan
(60.9) in the southern and eastern Mediterranean (SEMED) region, but is closer to that of Serbia (60.9) and Croatia
(61.9).6 Morocco aims to be among the top 50 countries worldwide for the quality of its business environment. In
2021, the National Business Environment Policy 2021-25 was adopted, focusing on three pillars: improving the
structural conditions of the business environment; simplifying companies’ access to necessary resources; and
reinforcing transparency, inclusion and cooperation between the public and private sectors. However, major
economic and financial interests in executive decision-making circles create scope for collusion, while transparency
is limited and judicial recourse for businesses is not always as efficient as it should be for a more dynamic private
sector.
Investment and value added are concentrated in a small number of large enterprises, the public sector is the
major driver of growth and jobs, and private-sector development has focused on attracting foreign direct
investment (FDI). Private-sector investment accounts for 16 per cent of GDP, while 63 per cent of value added is
generated by large enterprises. The public sector, investing mainly through SOEs, accounts for between half and
two-thirds of all investment in the country. In addition, the state plays a crucial role in employment, accounting for
42 per cent of employees in the formal sector. Moreover, the development of the private sector has typically
focused on attracting FDI, mainly via “industrial ecosystems” that concentrate on a small number of companies.
Morocco’s focus on FDI has created a distinct dichotomy in the economy, as domestic SMEs struggle to
integrate into value chains and fully leverage their growth potential. SMEs (roughly 90 per cent of Moroccan
firms) struggle to invest, increase value added, scale up and hire. According to Bank Al-Maghrib, SMEs only account
for around 27.3 per cent of GDP and 22 per cent of exports.7 Foreign firms continue to dominate “ecosystem” value
chains with strict quality standards – such as automotive and pharmaceuticals – and SMEs find it difficult to
participate in them, due to their limited capacity and access to finance. While there have been important benefits
for local and foreign companies in the ecosystem, those outside of it have not necessarily seen their business
environment improve. As a result, while they create a significant share of jobs in the informal sector (a declining
share, but still an estimated 30 per cent of GDP),8 their contribution to economic (and inclusive) growth remains
below potential.
Reforms have been passed to boost private investment, support SMEs and promote industrial innovation. In
2022, Morocco adopted a new Investment Charter, aiming to transform the country into a foreign-investment hub
and to increase the share of private investment to two-thirds of total investment by 2035. The new charter offers
subsidies and grants for investment projects carried out in key regions and sectors, enhances the business
environment and boosts investment in SMEs. In addition, the authorities launched a new programme to promote
industrial innovation by SMEs, by supporting the development of patents and the industrialisation of new products
and processes. The innovation programme aims to invest US$ 30 million (€28 million) to subsidise at least 100
qualified businesses over the course of 2023-25.
Despite numerous reforms over the past two decades, private firms in the formal sector face a number of
obstacles to development, including corruption and public services delivery. According to Enterprise Surveys,
corruption is the biggest obstacle to doing business (cited by 15.5 per cent of firms), followed by tax rates (15.2 per

6 See WEF (2019).

7 See Bank Al-Maghrib (2021a).
8 See Bank Al-Maghrib (2020).

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cent), tax administration (14.2 per cent) and informal-sector practices (9.1 per cent).9 A national firm-level survey
conducted by the Haut Commissariat au Plan (HCP) in 2019 produced a similar result, with 15.5 per cent of
companies that tendered for a public contract citing a lack of transparency.10 The country adopted an anti-
corruption law in 2020 and has moved towards getting the National Authority for Integrity, Prevention and Fight
Against Corruption (INPPLC) up and running. Moreover, in 2023, a new law introduced a phased reform to simplify
the corporate tax system and introduce a unified tax rate by 2026, to the particular benefit of medium-sized and
industrial firms. Other obstacles include challenges in accessing industrial land, low social capital, bureaucratic
hurdles, a slow justice system and a cumbersome public procurement system.
SOEs play an important role in the economy and often provide indispensable public services to the private
sector. They often operate in competitive segments of the economy, however, where they interact with private
businesses and have adverse effects on competition. Consequently, good governance is critical to ensuring that
SOEs make a positive contribution to the economy, minimise fiscal risks and improve their competitiveness. It
would also make them more resilient, enhance service delivery to customers and make them attractive to
investors. The government launched a comprehensive reform programme to restructure Morocco’s SOEs, starting
in 2021 with the creation of a state holdings agency (APE) to manage the ownership of the most strategic state-
owned firms.
In addition, Morocco’s private sector is constrained by oligopolistic structures in a number of key industries,
underpinned by a concentrated political economy and weak competition oversight. These sectors remain difficult to
penetrate and compete in for both domestic entrepreneurs and foreign investors. Morocco introduced laws to
regulate competition in 2014 and successfully reactivated the Moroccan Competition Council (MCC) at the end of
2018. In 2023, the MCC became much more active, especially in the field of merger control, amending the
country’s competition law by introducing a simplified filing form for no-issue transactions, raising the minimum
turnover required for a merger control filing, and requiring a filing fee (with an optional fee-based expedited review
process). In addition, in 2020, the government initiated an overhaul of SOEs by amending the law regulating public-
private partnerships (PPPs) to strengthen private-sector participation. It also created the Strategic Investment Fund,
established the National Public-Private Partnership Commission, and sold 8 per cent of its shares in Maroc Telecom
(in June 2019).
Private investment in Morocco has the potential to thrive if enterprises can seize the opportunities offered by
stronger involvement in global value chains and deeper integration with sub-Saharan Africa. Many of the
aforementioned challenges could become opportunities for the private sector to engage more deeply in economic
activity – for example, through PPPs and by creating more incentives to invest in activities that support the green
and digital transformation of the economy. Over the past 15 years, Morocco has implemented proactive industrial
strategies and integration into global value chains has increased significantly, especially for three promising sectors
and ecosystems ‒ health, automotive and aeronautics. Overall, Morocco’s participation in global value chains is in
line with that of comparable middle-income countries, but its backward participation (the share of the foreign value
added in Moroccan gross exports) is comparatively higher. In contrast, domestic value-added in exports remains
low, as many local SMEs struggle to integrate into such value chains. Moreover, deeper integration with sub-
Saharan Africa should enhance the share of domestic value in exports.
While Morocco’s total exports have risen rapidly over the past two decades, its main destination markets are
still in the European Union. Its efforts to benefit from regional trade and investment opportunities, particularly
within Africa, aim to offset its relative dependence on Europe. The country’s trade and investment links to sub-
Saharan Africa have been increasing steadily over the past two decades, but are still modest. The recent expansion
of Moroccan banks, together with significant Moroccan FDI to sub-Saharan Africa, indicate deeper integration with
the rest of the continent. Policy recommendations to promote integration include increasing FDI, upscaling and
supporting global value chains, removing current impediments to deeper integration in Africa, improving access to
finance and the diversification of financial instruments, and defining appropriate industrial policies.
Agriculture plays a significant role in the economy, but its dependence on rainfall adds volatility to growth. The
sector employs 37 per cent of the active population and accounts for 12 per cent of value added, but natural
resources have come under pressure due to population growth and less rainfall as a result of climate change. The
agribusiness sector has significant potential, but Moroccan smallholder farmers and companies struggle to rise in
the value chain. For example, the country’s agricultural strategy, Plan Maroc Vert resulted in an impressive increase
in the production of olives, citrus and red fruits, but did not achieve the desired results in terms of growth in rural
areas.11 In addition, agricultural trade is still hampered by seasonal restrictions, minimum entry prices and other
forms of quota. The new “Green generation” strategy for 2020-30, launched in February 2020, should help address
these issues by focusing on small farmers, women in rural areas, youth and people in mountainous areas, as well

9 See Enterprise Surveys (2019).

10 See Haut Commissariat au Plan (2019).
11 See CSMD (2021)

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as the overall climate resilience of agriculture. Thus, the new strategy will promote income-generating activities,
support the agricultural middle class and bolster farming exports and agricultural production
Morocco has one of the most developed financial systems in Africa, but it is mainly bank-centric and lacks
diversification of instruments and products. The sophistication of the banking system has allowed large Moroccan
banks to develop and expand their activities in Africa (Moroccan banks are present in about 35 countries all over
Africa), in part to accompany the expansion of large Moroccan corporate groups. However, concentration on a small
number of large corporate clients by a few large banks (five financial institutions account for 80 per cent of the
sector) is holding back sectoral development. While households account for about a third of bank credit and
financial and other services, construction and manufacturing each represent about 10 per cent of credit and bank
loans to SMEs only make up about 18 per cent of total credit. In addition, stringent collateral requirements and the
limited availability of credit information further constrain access to finance for a wider range of potential clients.
There is a need to strengthen the role of non-bank financial institutions (NBFIs), such as microfinance
institutions and leasing companies. The microfinance sector has seen steady growth since 2013, targeting
microenterprises and low-income clients. Microfinance institutions (MFIs) have more than 900,000 clients in
Morocco, of which about half are women. The microfinance sector is highly concentrated, with the three largest
MFIs holding a combined 92 per cent market share (and the five largest MFIs a 98 per cent market share).
Meanwhile, a new bill on microfinance was approved by parliament in 2021, with the aim of integrating the micro
credit sector further into the financial system and improving its governance. The leasing sector has developed amid
a sound legal and regulatory framework. There are seven main players, all of them bank subsidiaries, with SMEs
making up two-thirds of the clientele. Leasing is particularly valuable for small businesses without a track record,
collateral or other prerequisites to accessing traditional bank lending.
Morocco is one of the largest markets in the region for equity finance. The Casablanca Stock Exchange (CSE) is
the second-largest exchange in Africa by market capitalisation (cap). Morocco is also one of the most active
markets for private equity in Africa. However, the CSE is highly concentrated – with the 10 largest companies
accounting for around three-quarters of total market cap – and is not yet a good alternative for SME finance.
Moreover, a number of public initiatives focusing on SMEs have established public-private equity funds over the
past decade, targeting specific industries such as agriculture and green energy and, more recently, venture capital
funds to support start-ups. A new crowdfunding law is also opening up potential new avenues for alternative SME
finance.
Greater economic diversification and participation in global value chains remains crucial to ensure more
inclusive and resilient private-sector-led growth. Moroccan companies need to scale up and increase their
competitiveness, with advisory services to increase resilience, improve corporate governance and boost operational
efficiency and business standards, in addition to tailored financing solutions. Moreover, establishing Morocco as a
regional hub would support private-sector expansion to new markets and promote exports. There is also an
opportunity for Morocco to benefit from near-shoring opportunities in the wake of the Covid-19 pandemic.
Advancing the reform of SOEs and large companies and supporting SMEs would help level the playing field.
First, there is a need to provide tailored advisory and financing services for Moroccan SMEs and start-ups. Second,
promoting greater SOE commercialisation and advancing PPPs would facilitate the participation of the private
sector in various sectors and promote competition. Third, there is a need to support the development and adoption
of a state ownership policy and to strengthen the country’s Competition Council. Fourth, the digitalisation of
processes in both the private and the public sector, such as upgrading e-governance initiatives, could prove crucial
to unlocking private investment opportunities. Lastly, efforts to broaden and deepen local capital markets should
continue in order to provide additional sources of finance.

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2.2. Growth will have to become more inclusive for women, young people and rural regions

2.2.1. Women and young people need better access to economic opportunities for inclusive growth

Women and young people face significantly more constraints on access to services and goods, as well as
economic opportunities. Youth unemployment rates are high, including for tertiary graduates. Young Moroccans
often do not have the practical skills needed to succeed in labour markets, while young entrepreneurs struggle to
access finance and support measures. Only one-fifth of women are active in the labour force, as gender bias
continues to deter many from employment. This is despite many initiatives to improve the status of women in
society in a bid to enhance their involvement in the domestic labour force. Moreover, there are significant gender
and youth gaps in access to finance, although digital finance is helping to close some of them. The gender gaps are
indicative of the social and cultural norms that continue to place girls at a disadvantage, as well as a lack of
confidence in the educational system to care appropriately for young girls.
These challenges are even more pronounced in rural areas due to the limited number of schools. Many families
reportedly do not want their daughters to travel great distances to school, as they fear for their safety. This has
further reduced secondary attendance levels, with only 53.1 per cent of females of school-going age enrolled in
secondary school.12 Consequently, providing education for girls and boys in the rural communities of Morocco has
proved a perennial challenge. These gaps weigh heavily on the economy, limiting the inclusiveness and equity of
economic growth and fuelling Morocco’s failure to capitalise on its demographic dividend.
Hence, there is a need to support female and youth entrepreneurs through better education, targeted credit
lines and tailored advisory services. The promotion of equal opportunity policies and practices would further
improve access to employment for women and other underserved groups.

2.2.2. Rural regions would benefit from infrastructural expansion to promote economic opportunities
Nearly two-fifths of the Moroccan population are living in rural areas, but sizeable disparities exist between
urban and rural areas. The illiteracy rate in rural areas is twice as high as in urban areas. Moreover, rural areas are
among the poorest in the country. Economic activity in rural areas relies mostly on agriculture, with the majority of
the rural active population working directly in this sector, reflecting the lagging modernisation of the sector, where
very small farms predominate. Beyond agricultural activities, there has been no success so far in developing active
private entrepreneurship in rural areas and SMEs remain underdeveloped.
There are several obstacles to regional integration. First, Morocco’s underdeveloped digitalisation is hampering
rural connectivity and constitutes a real hurdle to integration. Second, access to basic infrastructure (transport and
logistics, electricity, sanitation) continues to lag in many rural and remote regions, despite efforts by the authorities
over the past two decades. Third, land access remains a challenge across the country, but especially in rural areas
‒ a result of the complexity and legacy of Morocco’s land tenure regime. Lastly, levels of education in rural areas
are still lower than in urban areas.
To reduce regional disparities, there is a need to support the further development of key infrastructure and to
strengthen access to services and economic opportunities in rural areas. Moreover, improving intra-regional
integration, increasing municipal resilience and promoting local sustainable development should be conducted in
line with the government’s decentralisation efforts, through policy engagement, technical assistance and financing.

2.2.3. Financial inclusion could be boosted by leveraging digital technologies

Despite Morocco’s rapid progress in recent decades, financial inclusion remains low (despite improvements)
and significant segments of the population have limited access to financial services. Women, young adults and
people living in rural areas are disproportionally affected and find it more difficult to access finance. This is evident
in the relatively low share of adults with an account at a financial institution. A dependence on cash and the
prevalence of a large informal economy contribute to the low level of financial inclusion. Around 90 per cent of
payments in Morocco are in cash compared with 40 per cent worldwide. The informal sector is estimated at about

12 See Haut Commissariat au Plan (2021).

9
30 per cent of GDP. About one-third of remittances are received or paid in cash, unlike many other economies at a
similar level of development, where most remittances are transferred through the banking system.
It is vital to accelerate digitalisation and implement the National Financial Inclusion Strategy (NFIS). Access to
and the use of digital payment platforms remains very limited in Morocco. The NFIS, adopted in 2019, the adoption
of mobile payments and a new legal framework for crowdfunding will help foster financial inclusion. A draft law on
the establishment of electronic crowdfunding platforms was submitted to parliament in November 2019. It would
bolster the availability of financing for micro- and small businesses, in particular, and help to attract funds from
Moroccans living abroad back to the national economy.
Promoting access to finance for targeted groups is required on many fronts. First, banks should use dedicated
financing and technical assistance packages. Second, Bank Al-Maghrib should accelerate the implementation of
the NFIS and remove regulatory and operational barriers to financial inclusion.

2.3. Key reforms will be needed to implement the country’s green economy transition ambitions

Since 2015, Morocco has made considerable efforts to advance its green economy transition. It has developed
a 2050 vision, aimed at supporting national and sectoral strategy alignment, which will serve as the foundation for
a long-term, low-emissions development strategy. In June 2021, Morocco put forward an enhanced and more
ambitious Nationally Determined Contribution (NDC), targeting a 45.5 per cent reduction in greenhouse gas (GHG)
emissions by 2030. It is one of only a few NDCs to be rated “almost sufficient” to reach the 1.5°C goal of the Paris
Agreement. The revised NDC includes key sectoral strategies and targets for all seven sectors included for
mitigation.13 Moreover, in 2016, Morocco started to draw up its National Adaptation Plan (NAP), allowing it to
develop a concerted and inclusive framework to support adaptation planning and priority actions.
Emissions remain high, however, energy intensity is expected to grow and water scarcity will increasingly
become a risk amid climate change. While Morocco’s share of global GHG emissions remains comparatively low
(0.19 per cent in 2018),14 its emissions have increased considerably since 1990 due to a rise in energy demand.
The energy sector accounts for the majority of the country’s GHG emissions. Transport, the use of household
appliances by a growing middle class and industrial growth are also contributing to the rise in emissions. Tightening
regulatory requirements for labelling (latest reforms in 2021) will improve energy-efficiency standards, but their
implementation will be essential for savings to materialise. In addition, electricity generation remains heavily
skewed towards fossil fuels, which account for 78 per cent of electricity supply,15 and relies heavily on imported
coal, with demand growing 5 per cent a year. Lastly, Morocco is expected to experience extreme water stress within
the next 25 years. The country faces dwindling groundwater reserves against a backdrop of climate change and
increasing extraction pressure. Its reliance on rain-fed agriculture (with limited penetration of water-efficient and
smart agricultural technologies), for example, makes this a serious risk to future growth.
Morocco’s renewables sector has several strengths that create significant investment potential. Morocco
enjoys a vast renewable resource base that it could develop with the partnership and capabilities of the private
sector, thereby helping the country to diversify its generation sources, boost security of supply and reduce
consumer costs. In 2020, wind and solar accounted for 15 per cent of electricity generation,16 well short of the
country’s 2030 target of 52 per cent renewables capacity. Moreover, plans to boost interconnectivity to the Spanish
power market (among additional routes being explored) could enhance export opportunities for competitive
Moroccan wind and solar projects, while its ambitions to become a leader in green hydrogen could yield another
boost.17 Some preconditions have already been met: the terms of solar and wind-power capacity auctions have
been relatively favourable, supporting renewable energy expansion. In addition, Morocco has a track record of
project delivery, fostering greater investor confidence in future capacity auctions. This is underpinned by
improvements in the business environment more broadly, as well as strong political support for reducing emissions
in the power sector.
Full liberalisation of the power market and upgrading its grid infrastructure to cater for a greater share of
renewables could further boost investment potential in the sector. Structural reforms should include unbundling
the former integrated state utility company, completing tariff reform, amending the private-to-private regulatory
framework and strengthening the capabilities and mandate of the new sector regulator. In some cases, changes to
primary legislation may be needed to remove any potential conflicts of interest, such as control of the National
Office for Electricity and Drinking Water (ONEE) on the transmission network and continued ownership of power

13 Namely, energy production, waste, industry, forestry and land use, agriculture, transportation and residential.
14 See Climate Watch (n.d).
15 See IEA (2021).
16 Ibid.
17 See IRENA (2021).

10
generation assets. Other obstacles could be addressed through secondary legislation or decisions by the regulator,
such as unbundling and the adoption of the country’s first electricity grid code. In 2023, Morocco amended its laws
on renewable energy and regulation of the electricity sector, enabling independent power producers (IPPs) to
produce, self-consume, sell and export renewable energy by connecting to the national grid, a positive step towards
boosting private investment in the sector.
Morocco’s green transition would benefit from reforms to reduce GHG emissions and manage water scarcity
more strategically. Beyond power-market reforms and renewable auctions, it will be essential to expand the
country’s infrastructure in a sustainable way ‒ not just transport, but also waste collection and recycling. Moreover,
urban development in key cities would benefit from greater orientation towards sustainable technologies. Lastly,
improving water management will be essential to continued growth. Expanding the use of desalination technologies
(without increasing emissions from fossil-fuel use) should be accompanied by promoting sustainable and smart
agricultural technologies (for irrigation, for example) to mitigate the risks of volatile rainfall and better manage
water use. Morocco has a long-term plan to operate at least 20 desalination plants by 2030, with a total annual
production capacity of 1.3 billion cubic meters, while linking them to renewables as the main source of electricity.
This is part of its National Water Plan 2020-50, a US$ 38.3 billion (€36 billion) programme launched in 2020 to
address water challenges over the next three decades. As a first phase, it launched the National Drinking Water
Supply and Irrigation Program (PNAEPI) 2020-27, aimed at scaling up investments in the water sector,
strengthening the supply of drinking water and irrigation, and building resilience to climate risks. In 2023, the
programme’s budget allocation was upped to US$ 14.3 billion (€13.4 billion) (from an initial US$ 11.5 billion, or
€10.8 billion), to boost freshwater storage capacity (by accelerating the construction of dams and connecting
various water basins), increase the share of reused, treated wastewater, and speed up the transition to alternative
water sources (such as desalinated seawater).

11
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Bank Al-Maghrib (2020), The Size and Development of the Shadow Economy in Morocco, Rabat (available at:
https://www.bkam.ma/en/Publications-statistics-and-research/Research2/Working-paper/2020).

Bank Al-Maghrib (2021a), “The Moroccan SMEs Observatory publishes its annual report”, Rabat (available at:
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Bank Al-Maghrib (2021b), Rapport annuel sur la supervision bancaire: Exercice 2020, Rabat (available at:
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https://www.eea.europa.eu/ims/waste-recycling-in-europe).

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progres_a2759.html).

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IEA (n.d.b), “Data and Statistics”, Paris (available at: https://www.iea.org/data-and-statistics/data-products).

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IEA (n.d.d), “Middle East”, Paris (available at: https://www.iea.org/regions/middle-east).

IMF (n.d.), “Balance of Payments and International Investment Position Statistics (BOP/IIP)”, Washington, DC
(available at: https://data.imf.org/?sk=7A51304B-6426-40C0-83DD-CA473CA1FD52).

International Trade Administration (n.d.), “Connecting You to Global Markets”, Washington, DC (available at:
https://www.trade.gov/export-solutions).

12
IRENA (2021), “Morocco and IRENA Partner to Boost Renewables and Green Hydrogen Development Tweet”,
Masdar City, Abu Dhabi (available at https://www.irena.org/newsroom/pressreleases/2021/Jun/Morocco-and-
IRENA-Partner-to-Boost-Renewables-and-Green-Hydrogen-Development).

NDC Partnership (2021), “Morocco Submits Enhanced NDC, Raising Ambition to 45.5 Percent by 2030”,
Washington, DC (available at: https://ndcpartnership.org/news/morocco-submits-enhanced-ndc-raising-ambition-
455-percent-2030).

OECD (2019), “Social Institutions and Gender Index 2019”, Paris (available at: https://www.genderindex.org/wp-
content/uploads/files/datasheets/2019/MA.pdf).

Special Commission on the Development Model (2021), The New Development Model, Rabat (available at:
https://csmd.ma/rapport-en).

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UNDP (n.d.) “Climate Change Adaptation: Morocco”, New York (available at: https://www.adaptation-
undp.org/explore/arab-states/morocco).

UN News (2022), “From Milan to Glasgow, young Moroccans commit to fighting climate change”, 22 January
(available at https://news.un.org/en/story/2022/01/1110302).

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https://www.usaid.gov/morocco/water-and-sanitation).

WEF (2017), The Global Competitiveness Report 2017-2018, Geneva, Switzerland (available at:
https://www3.weforum.org/docs/GCR2017-
2018/05FullReport/TheGlobalCompetitivenessReport2017%E2%80%932018.pdf).

WEF (2019), The Global Competitiveness Report 2019, Geneva, Switzerland (available at:
https://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf ).

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https://lpi.worldbank.org/).

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https://info.worldbank.org/governance/wgi/).

World Bank (n.d.c), “World Development Indicators”, Washington, DC (available at:

https://datatopics.worldbank.org/world-development-indicators/).

World Bank (2014), “MA-Solid Waste Sector DPL4, Program Information Document (PID, Concept Stage”,
Washington, DC (available at:
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BLIC0.pdf).

World Bank (2017), Managing Urban Water Scarcity in Morocco, Washington, DC (available at:
https://documents1.worldbank.org/curated/en/416241516117427311/pdf/122698-WP-P157650-Summary-
Report-Urban-water-scarcity-in-Morocco-ENG-P157650-2017-12-25-04-12.pdf).

World Bank (2018), Morocco Energy Policy MRV: Emission Reductions from Energy Subsidies Reform and
Renewable Energy Policy, Washington, DC (available at:
https://documents1.worldbank.org/curated/en/964331541085444404/pdf/Morocco-Energy-Policy-MRV.pdf).

13
World Bank (2021a), Women, Business and the Law 2021, Washington, DC (available at:
https://www.worldbank.org/content/dam/sites/wbl/documents/2021/02/WBL2021_ENG_v2.pdf ).

World Bank (2021b), Morocco: Municipal Solid Waste Sector Development Policy Loans 1-4, Washington, DC
(available at:
https://ieg.worldbankgroup.org/sites/default/files/Data/reports/ppar_moroccomunicipalsolidwaste.pdf).

World Bank GovData360 (n.d.), “Harmonized Test Scores”, Washington, DC (available at

https://govdata360.worldbank.org/indicators/hc58163b0?country=BRA&indicator=40961&viz=line_chart&yea
rs=2010,2020).

United Nations Population Division (2019), “World Population Prospects 2019”, New York (available at:
https://population.un.org/wpp/DataQuery/).

14
Annex I. Qualities of a sustainable market economy
The EBRD’s Assessment of Transition Quality (ATQ) scores are based on a distance-to-frontier approach, with
the best-performing countries used as benchmark. The scores are rescaled to 1–10, with 1 representing little or no
progress and 10 representing the frontier. The Bank considers the following six qualities of an economy:
competitive, well governed, green, inclusive, resilient and integrated. Further details on the elements considered
under each quality can be found in Annex 2.
In terms of overall ATQ score, Morocco ranks 25th among the 38 economies in which the EBRD invests, with an
average score of 4.91. Its best scores are for the well-governed (5.83), green (5.16), integrated (5.15) and resilient
(4.83) qualities, while its lowest are for the inclusive (4.18) and competitive (4.33) qualities, where there are
significant gaps.
Figure A.1. ATQs scores, 2022

Note: EBRD calculations. The level of development in terms of each of the qualities is measured from 1 to 10,
where 10 represents a synthetic frontier corresponding to the standards of a sustainable market economy.

15
Competitive [ATQ = 4.33]

Morocco ranks 27th among EBRD economies in the Bank’s 2022 assessment of competitiveness.

Market structures and institutions for competition

▪ Morocco benefits from a certain degree of openness to international markets. The weighted average of
applied tariff rates in Morocco was 3.6 per cent in 2019, better than the average for the SEMED region, but
below the EBRD average. Its openness to international markets has been improving over the years, both in
relation to non-agricultural and agricultural products and thanks to a number of trade agreements that it has
concluded.
▪ Morocco is one of the best-performing SEMED countries when it comes to the quality of the business
environment and regulatory frameworks and is quite supportive of SMEs, enterprise productivity and
competitiveness. Thanks to several reforms, starting a business and paying taxes has become easier in recent
years. However, although SMEs consider Morocco to have a better business environment than many other
countries, they still struggle to access finance and find sufficient entrepreneurial support.
▪ Advanced services (communications, financial, insurance and other business services) as a share of total
services exports was around 38 per cent in 2020. The services sector is a major contributor to the Moroccan
economy, but is driven by tourism and travel. In this regard, Morocco performs slightly better than the averages
of the SEMED and EBRD regions.

Capacity to generate value added and to innovate

▪ Despite its fairly diversified economy, Morocco’s score on the economic complexity index (3.11) reveals that
the country performs below the average of the SEMED and EBRD regions (4.50 and 5.18, respectively). This is
due to the limited diversification and low/moderate complexity of the goods exported (mainly textile and
agricultural products), which are impeded by the somewhat narrow focus of the political economy. The
country’s integration into global value chains is higher than the SEMED average and slightly below the
average for the EBRD region (4.92, 4.24 and 5.70, respectively) due to the preponderance of agricultural and
other exports.
▪ Improvements in relation to logistics may enhance competitiveness further, with a specific focus on trade and
transport-related infrastructure, notably for rural and remote areas. The country performs in line with the
SEMED region, but lags the average of the EBRD regions.
▪ Among the weakest elements in terms of the competitive transition quality is the quality and suitability of
Morocco’s workforce skills. Although this is a countrywide issue, a deep urban-rural divide exacerbates it. In
addition, agriculture employs around one-third of the active population. Morocco’s performance lags
substantially the average of the SEMED and EBRD regions (at 2.09, placing it behind all other EBRD
economies).
▪ As for labour productivity, Morocco also scores lower than the average of the SEMED and EBRD regions (at
2.40 compared with 3.40 and 4.59, respectively). This is down to the low educational levels and skills of the
workforce and high degree of informality in the economy.

16
Figure A.2. “Competitive” ATQ indicators, 2022

17
Well governed [ATQ = 5.83]

In 2022, Morocco ranked 20th out of 38 EBRD economies on the well-governed quality.

87th out of 180 countries on the Corruption Perceptions Index 202118

75th out of 137 countries on judicial independence19
39th among 137 countries on the burden of government regulation20
55th out of 137 countries on the strength of auditing and accounting standards21

Governance at national level

Morocco performs moderately well on the quality of national-level governance. The country scored better than
most of its SEMED peers on the World Bank’s Worldwide Governance Indicators, such as the rule of law and non-
violence and political stability. However, its scores for control of corruption and government effectiveness leave
room for improvement, while its law enforcement could be better.22
Morocco ranked 87th out of 180 countries in the Corruption Perceptions Index for 2021, with 53 per cent of
respondents believing corruption had increased in the previous 12 months. 23 Businesses still perceive bribes
and favouritism to be widespread, despite government efforts to contain them, including through digitalisation. A
lack of transparency and access to information in sectors dominated by SOEs is also a key constraint on increasing
private investment and improving competition.
Morocco’s judicial system is still perceived as inefficient and biased due to its excessive bureaucracy and lack
of independence. Despite a slight improvement in the World Economic Forum’s “efficiency of legal framework in
settling disputes” indicator, the mechanisms of law enforcement could be enhanced and streamlined.24
Public media are perceived as not being free or independent, though private media enjoy some degree of
freedom of expression in comparison. Morocco scores 37 out of 100 on the Global Freedom Index developed by
Freedom House, and ranked 136th out of 180 countries on the 2021 World Press Freedom Index.25

Corporate governance
Morocco is a pioneer in the SEMED region when it comes to implementing successful large-scale privatisation
programmes, undertaking SOE restructuring and publishing annual reports. Morocco ranks highest in the
SEMED region on the EBRD’s Legal Transition Team (LTT) internal control indicator and transparency disclosure.
Improvements could be made when it comes to the nomination of boards of directors, particularly with regard to
the promotion of independent board members. A state ownership policy and greater autonomy for SOE
management would boost the economic performance of SOEs, while greater market competition would help to
ensure a level playing field for all participants.
Protecting shareholders: Morocco is the most advanced economy in the SEMED region in terms of protecting
minority investors and shareholders from undue board control and entrenchment.

18 See Transparency International (2021).

19 See WEF (2019).
20 Ibid.
21 Ibid.
22 See World Bank (n.d.b).
23 See Transparency International (2021).
24 See WEF (2019).
25 See Freedom House (n.d.).

18
Figure A.3. “Well governed” ATQ indicators, 2022

19
Green [ATQ = 5.16]

Morocco is pursuing a high-level climate goal in its NDCs, but to achieve and implement its green economy
transition, it will need more investments in sustainable energy, waste management, green cities and climate
adaptation. Compliance with and the implementation of existing policies remains critical. Under the Paris
Agreement, Morocco’s government is committed to reducing GHG emissions by 45.5 per cent26 from business-as-
usual levels by 2030, if international support is available.27 The country’s revised NDC includes targets for all seven
sectors covered by mitigation, while its adaptation targets have been reinforced, building on Morocco’s National
Adaptation Plan.28

Morocco’s electricity generation relies on coal (68 per cent), gas (9 per cent), oil (2 per cent), hydro (3 per
cent), wind and solar (15 per cent) and other sources (3 per cent).29
Renewable Energy generation increased more than five-fold from 2008 to 2018.
The carbon intensity of Morocco’s energy mix was significantly higher than the European Union-28 average in
2019, at 70.7t CO2/TJ compared with 45.4t CO2/TJ).30
Urban water demand is expected to rise between 60 per cent and 100 per cent in most large cities by
2050.31

Energy consumption has doubled since 2000 and is dominated by oil, coal and natural gas, which are mostly
imported.32 Morocco’s electricity demand is expected to grow by 5 per cent per year on average,33 thanks to its
growing population, greater access to electricity through the rural electrification programme (PERG), development
of major infrastructure projects, urbanisation, economic growth and improving standards of living. Residential
electricity demand (cooling, appliances and cooking) is expected to drive future energy use.
Current energy efficiency measures will not be enough to meet the country’s energy and climate objectives.
Morocco has been able to transition to more efficient products and appliances, thanks to policy reforms, but energy
efficiency remains a key challenge. Morocco’s energy efficiency strategy, passed in 2011, was revised to include
targets aimed at improving energy efficiency by 20 per cent by 2030 and developing action plans in the sectors of
transportation, construction, industry, agriculture and public lighting.34 Further measures should be put into place
in areas such as corporate climate governance to manage industrial emissions, greening the financial sector and
developing e-mobility and lower emissions strategies for the transport sector.
While the share of renewables in electricity is progressing fast, significant investment is needed to reach
targets. Morocco has excellent prospects as regards the cost-effective expansion of renewables, both as a share of
and beyond the power sector, to facilitate the shift to sustainable industrial growth. The National Energy Strategy
(revised in 2015) envisages the share of renewables reaching 52 per cent of all electricity generated by 2030 (20
per cent solar, 20 per cent wind and 12 per cent hydro), while Morocco pledged at COP26 to accelerate investment
to take this number to 60 per cent by 2030.35
Climate projections suggest reduced rainfall and a sharp decline in the availability of water resources on one
hand36 and an increase in sea levels on the other. Morocco is considered water scarce, amid dwindling
groundwater reserves and a strong dependence on rain-fed agriculture (the main consumer of freshwater
withdrawals). Morocco is expected to enter a situation of extreme water stress in fewer than 25 years.37 Morocco’s
economy still relies heavily on agriculture output, which is in turn dependent on annual rainfall.38 Its coastal zones
are also at risk, with the Intergovernmental Panel on Climate Change (IPCC) estimating up to 59 cm of average
global sea-level rise by 2100. 39 Consequently, the climate change resilience of infrastructure investments will be
essential.

26 See IEA (n.d.b).

27 Note that 18.3 percentage points of the 45.5 per cent are “unconditional”, while the remaining 27.2 percentage points are conditional on
international assistance.
28 See NDC Partnership (2021).
29 See IEA (n.d.c).
30 See IEA (n.d.d).
31 See World Bank (2017).
32 See World Bank (2018) and IEA (n.d.c).
33 See IEA (n.d.b).
34 See International Trade Administration (n.d.).
35 See UN News (2022).
36 See World Bank (2017).
37 Ibid.
38 See USAID (n.d.).
39 See UNDP (n.d.).

20
While Morocco has made significant investments in the waste sector, waste generation remains high and more
improvement is required to meet targets.40 Municipal waste-collection rates have doubled in recent years, but
recycling was used for just 4 per cent of all waste in 2016, compared with the EU average of 45 per cent.41 A large
proportion of waste is still disposed of in illegal dumpsites, often in or along streams or riverbeds or in areas where
water resources are vulnerable, causing soil and water pollution. Likewise, burning waste is having detrimental
effects on public health and the environment in Morocco. The 2008–22 National Strategy for Waste Management
and the National Strategy for Sustainable Development frameworks guide the waste sector, but adoption of best
practices (and implementation) will be essential to decouple economic growth from resource use.
Conservation and the sustainable use of natural resources should be encouraged and enforced, including in the
marine and forest sectors. Deforestation and over-fishing have been ongoing issues, threatening the biodiversity of
Morocco’s forest and marine ecosystems. Approximately two-thirds of Morocco’s beaches are at risk of coastal
erosion, endangering both natural habitats and economic activity. Morocco’s NDC identifies actions and objectives
for the forest and fisheries sectors, while there is strict legislation to guide them. Enforcement of this legislation will
be crucial to the sustainable management of the country’s natural resources.
Figure A.4. “Green” ATQ indicators, 2022

Note: INDCs = Intended Nationally Determined Contributions. NDGAIN = Notre Dame Global Adaptation Initiative.

40 See World Bank (2014).

41 See World Bank (2021b), EEA (2021) and Eurostat (2021).

21
Inclusive [ATQ = 4.18]

Median age: 29.5, above the regional average42

Difference between youth (15-24) and adult (25+) unemployment rates: 68 per cent, lower than most EBRD
countries43
Unemployment among 15-24 year olds: 22.1 per cent44
Quality of administrative, health and education systems: Low perceived quality of education, among the
worst-performing countries in the EBRD regions45
Women Business and the Law Index: Morocco scores 75.6 out of 100, higher than the regional average in
the Middle East and North Africa (51.5)46

Morocco ranks 30th on the inclusive quality (regional, gender and youth inclusion) among the 38 EBRD economies
in which the EBRD invests. Its ranking has remained unchanged for the past four years.

Gender inclusion
■ Women and the Law: According to the World Bank’s Women and the Law Index, Morocco scores higher than
most countries in Middle East.47 Morocco is one of eight economies since 2017 to have enacted legislation on
domestic violence for the first time – indicating a trend of efforts to protect women from violence.
■ Female workforce participation: Female labour-force participation remains low, at 21.4 per cent compared
with 70 per cent for men.48 Women’s economic participation (including in managerial roles) is constrained by
strong stereotypes and traditions (notably in rural areas), unequal land rights, marriage and inheritance laws,
restrictions on certain professions and lower levels of access to education than men. The migration of women
from rural to urban areas has further weakened women’s labour-force participation.
■ Women’s financial inclusion: Morocco’s Social Institutions and Gender Index (SIGI), at 0.508, is in line with the
regional average, but significantly lower than the EBRD average.49 Gender gaps in financial inclusion are higher
than in other SEMED countries and women do not benefit equally from social protection services. They are also
prohibited from undertaking certain professions due to a “risk of excessive danger”.

Youth inclusion
■ Young people’s access to employment: Morocco ranks 35th out of the 38 EBRD investee economies when it
comes to youth inclusion. Youth unemployment remains high, at 22.1 per cent, slightly below the average for
the SEMED region.50
■ Education: The quality of education in Morocco is low, as evident in its harmonised test scores (380), where
625 represents advanced achievement and 300 represents minimum attainment. This is lower than the
regional average for the SEMED region.51 Similarly, Morocco performs poorly when it comes to the perception of
quality of education system (1=worst, 7=best).52

42 See United Nations Population Division (2019).

43 See World Bank (n.d.c).
44 Ibid.
45 See WEF (2017).
46 See World Bank (2021a).
47 Ibid.
48 See World Bank (n.d.c).
49 See OECD (2019).
50 See World Bank (n.d.c).
51 See World Bank GovData360 (n.d.).
52 See WEF (2017).

22
Regional inclusion
■ Transport: At 2.43 (1= worst, 5= best), the quality of Morocco’s trade and transport ‒ as related to
infrastructure, such as ports, railroads, roads, information technology ‒ is slightly below the regional average
(2.54)
■ Access to services and financial inclusion: Data remain limited in this area. Data outside the EBRD index for
regional inclusion highlight efforts to reduce the number of people living in poverty in rural areas and to address
the multi-dimensional nature of inequalities. However, and despite progress in recent years, the inequalities
between urban and rural areas are significant and economic opportunities are limited in many regions.

Figure A.5. “Inclusive” ATQ indicators, 2022

23
Resilient [ATQ = 4.83]

Financial resilience
Morocco’s financial sector is large and split between banks, non-bank financial institutions and capital
markets. Overall, they exhibit stability and growth, but will need to evolve to cater to the needs of the country’s
industrialising economy. Areas requiring attention include financial inclusion, access to finance and support for a
broader range of firms, including SMEs, to engage in value-added economic activity. The combined effects of
aggressive capital management, expansion to Sub-Saharan Africa (SSA) and the Covid-19 pandemic have left the
largest banks with small capital buffers and subject to risks related to international exposure, persistent single-
borrower concentration and non-performing loans (NPLs) that are higher than the EBRD average, despite being well
provisioned.
Morocco’s banking sector is highly concentrated, with the top three banks accounting for close to two-thirds of
banking-sector assets and deposits. Foreign banks have a significant presence (and are largely French), but do
not dominate, owning about 15 per cent of sectoral assets. The asset share of the five largest banks is more than
80 per cent, largely unchanged from previous years. Privately owned banks’ asset share is also stable, at around
65 per cent in 2020.53
Because of the increasingly saturated domestic market, the major Moroccan banks have expanded regionally
in search of revenues, notably in sub-Saharan Africa. Key new markets include Senegal, Mali, Côte d’Ivoire and
Benin. Economic and financial difficulties in one or more of the host countries could result in risk transmission. The
three largest banks have led the international expansion; lending in sub-Saharan Africa accounted for about 20 per
cent of the banks’ consolidated total loan portfolio and around 30 per cent of profits in 2019. Due to weakening
loan quality in these operations, however, the largest Moroccan banks have become more bearish, moderating the
pace of their expansion and aligning risk management at sub-Saharan subsidiaries with domestic standards.
Capitalisation and profitability deserve continued attention from sector players. Morocco’s average capital
adequacy ratio (CAR) reached 13.6 per cent in 2020, compared with 13.9 per cent in 2019 and 14.7 per cent in
2018. With capital ratios approaching the regulatory minimum, it is important for banks to increase their buffers,
though this is challenging in a low-profitability environment. The return on average equity increased in early 2021,
boosted by a lower cost of risk, but remains significantly below pre-crisis level. More than revenue growth, cost
controls will be crucial for earnings recovery. Banks will also have to do without the state-guaranteed loan
programmes initiated in 2020, as most of the available amount has been utilised.
Bank portfolios remain concentrated in relatively few big names and have recorded sluggish growth in recent
years compared with nominal GDP expansion. The ratio of bank credit to GDP has hovered around 80 per cent for
the past five years.
Asset quality has been stable, but remains a concern. NPLs remained high in 2020 (and higher than in many
other economies where the EBRD operates), at 8.2 per cent of total loans, corresponding to a 13.9 per cent
increase in volume terms year on year. To cope with the higher default rate, banks have increased their provisions
by 13 per cent, for an average coverage ratio of 69 per cent.
Morocco’s domestic capital markets are relatively developed, with the buy-side comprising local pension funds
and insurers. The capital market is functioning well in a local and regional context, but could be developed further
to attract issuers and investors. The market capitalisation of the Moroccan stock exchange was around 62 per cent
of GDP in 2020, up from 55 per cent in 2019 and 52 per cent in 2018. Non-bank financial institutional assets
account for 38 per cent of the financial system. Some 27 non-bank lenders (consumer lending, real estate, leasing
and factoring) and 12 micro-credit institutions provide alternative financing to households and SMEs.

Energy resilience
The energy sector in Morocco has made some good progress in recent years boosting its resilience. Structural
reforms aimed at opening the market (creating an independent sector regulator (ANRE) and liberalising electricity
generation and distribution have helped to support growing private-sector participation in renewables. However, the
continued dominance of a former state monopoly, the control it exerts and subsidised tariffs that undermine
market signals are preventing Morocco from developing a more dynamic market. In the country’s nascent gas
sector, this translates largely into state control of gas import rights.

53 See Bank Al-Maghrib (2021b).

24
Figure A.6. “Resilient” ATQ indicators, 2022

25
Integrated [ATQ = 5.15]

Trade as a share of GDP:54 82.5 per cent, compared with a selected OECD comparator country55 average of
71.8 per cent56
FDI inflows as a share of GDP: 2.7 per cent, compared with a comparator country average of 2.6 per cent
Portfolio inflows as a share of GDP: 0.1 per cent, compared with a comparator country average of 2.4 per cent
Quality of infrastructure: ranked 53rd out of 141 countries57
Logistics performance index: ranked 109th out of 160 countries58

In the 2022 ATQs, Morocco ranks 26th among the 38 economies in which the EBRD invests when it comes to the
integrated quality, but third in the SEMED region after Jordan and Lebanon, thanks to moderate internal integration
but lower scores for trade and investment openness.

External integration
■ Trade environment: Exports and imports of goods and services as a share of GDP have risen slowly, but
steadily. Morocco is part of relatively few regional trade agreements, but its number of non-tariff measures is
also low.
■ Investment environment: Morocco’s openness to FDI flows (2.7 per cent) has been stable over the past
decade, but below the regional (2.9 per cent) and EBRD country averages (5.4 per cent). The country is part of
58 bilateral investment treaties, with investment provisions in force (EBRD average: 65).
■ Non-FDI environment: Morocco’s capital-account openness is below regional, EBRD and comparator country
averages. The same is true for portfolio inflows as a share of GDP over the past five years.

Internal integration
■ Domestic transport: Morocco ranks highest out of all EBRD investee economies when it comes to road
connectivity. With intercity travel times typically 18 per cent longer than the frontier,59 it performs above regional
and EBRD averages in terms of non-road transport infrastructure. Despite improvements in recent years,
notably in ports, Morocco’s domestic logistics performance remains lower than the EBRD regional average. The
proportion of products lost to breakage or spoilage during shipping is the highest of all EBRD countries.
■ Cross-border integration: Similar to the domestic logistics performance, Morocco’s international logistics
performance is lower than that of its peers. Trading across borders in Morocco is above regional, but below
EBRD and comparator country averages.
■ Energy and ICT: The quality of electricity supply in Morocco is relatively high and the time required to obtain a
permanent electricity connection is among the shortest of all EBRD economies. However, according to the IEA,
electric power transmission and distribution losses are high. Around 64.8 per cent of the population uses the
internet (compared with 64.2 per cent in SEMED, 68.3 per cent in the EBRD economies and 88.6 per cent in
the comparator countries), while fixed broadband subscriptions are low.

54 Five-year average.
55
The set of comparator countries includes Canada, the Czech Republic, France, Germany, Japan, Sweden, the United Kingdom and the United States
of America.
56
See IMF (n.d.).
57 See WEF (2019)
58 See World Bank (n.d.a) LPI database for 2018.
59 Frontier = Distance as the crow flies at a speed of 110 km/h.

26
Figure A.7. “Integrated” ATQ indicators (external and internal integration), 2022

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Annex 2: ATQ scoring methodology

Components Sub-Components
Openness

Market structure that supports competition and incentives for sound decision making Dynamic structures

Institutions

Business skills

Value chains
Knowledge / ICT
Competitive

Capacity to add value and innovate

ICT infrastructure

Infrastructure

Human capital

Finance

Quality of public governance

National-level governance Integrity and control of corruption

Rule of law
Well-governed

Corporate governance frameworks and practices

Corporate-level governance Integrity and other governance-related business standards and practices

Physical indicators

Climate change mitigation Structural indicators

Physical indicators

Climate change adaptation Structural indicators

Green

Physical indicators

Other environmental areas Structural indicators

Legal regulations and social norms

Gender Access to health services

Education and training

Labour policy

Labour practices

Employment and business

Access to finance

Labour market structure

Youth Youth employment

Quantity of education
Inclusive

Quality of education

Skills mismatch

Financial inclusion

Institutions

Regions Access to services

Labour markets

Education

Financial stability Financial sector

Liberalisation & market liquidity
Resilient

Energy sector resilience System connectivity

Regulation and legal framework

Trade

Trade (external dimension) FDI

Balance of payments openness

Integrated

Cross-border infrastructure

Infrastructure (internal dimension) Domestic infrastructure quality

Energy

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1454 Morocco diagnostic 2023

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