Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized

MOROCCO
MONITOR
sector to spur growth
potential of the private

and job creation

Unlocking the

Summer 2024
ECONOMIC
 Morocco Economic
Update
Unlocking the potential of the private sector
to spur growth and job creation

Summer 2024

Middle East and North Africa Region

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TABLE OF CONTENTS
List of Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .vii
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Résumé Analytique . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
‫ ملخص تنفيذي‬. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv
1. Recent Economic Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Economic growth has recovered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Despite a challenging international environment, the external performance
of the Moroccan economy has been remarkable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
A supportive macroeconomic stance has contributed to the acceleration of economic growth. . . . . . . . . . . 7
But Moroccan firms and households are struggling to recover from recent shocks. . . . . . . . . . . . . . . . . . . . . . 8

2. Outlook and Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

3. Private Sector Dynamics in Morocco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

Aggregate productivity trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Microeconomic drivers of productivity in Morocco’s formal private sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Policy implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Selected Recent World Bank Publications on Morocco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Summary of Special Focuses from the Latest Morocco Economic Updates . . . . . . . . . . . . . . . . . . 31

iii
 List of Figures
Figure 1 As opposed to most other comparator countries, activity accelerated in 2023… . . . . . . . . . . . . . . .1
Figure 2 the contribution of manufacturing to growth increased towards the end of 2023… . . . . . . . . . . . . . 2
Figure 3 …as did that of private consumption and gross capital formation . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Figure 4 Moroccan share of tourism, 2010–2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Figure 5 Stock by country (2021) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Figure 6 Flows (2022–2023) by country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Figure 7 Stock by sector (2021) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Figure 8 Flows (2022–2023) by sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Figure 9 Greenfield FDI announcements surged . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Figure 10 Share of Morocco in total announced FDI in Africa almost doubled since 2018–2019 . . . . . . . . . .5
Figure 11 FDI Morocco outperformed peers (FDI announcements as a share of GDP) . . . . . . . . . . . . . . . . . 5
Figure 12 The market’s perception on Morocco’s country risk has improved markedly… . . . . . . . . . . . . . . . . . 6
Figure 13 …bolstered by the country’s solid external liquidity buffers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Figure 14 The economic complexity of Morocco’s export basket is increasing . . . . . . . . . . . . . . . . . . . . . . . . . 7
Figure 15 The current account balance narrowed in 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Figure 16 The size of the public sector has increased substantially since COVID-19… . . . . . . . . . . . . . . . . . . .8
Figure 17 …but dynamic revenues are keeping the budget deficit on a downward trajectory . . . . . . . . . . . . . 8
Figure 18 the disinflation process has been comparatively fast in Morocco… . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Figure 19 … despite BAM’s modest monetary policy tightening . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Figure 20 Credit to the private sector slowed in 2023… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Figure 21 …especially for short-term liquidity loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Figure 22 Labor markets indicators have worsened significantly… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Figure 23 …the responsiveness of job creation to economic activity has declined . . . . . . . . . . . . . . . . . . . . . 10
Figure 24 Changes in the relative weight of expenditure components between 2024–2026 vs 2023 . . . . . 14
Figure 25 Changes in the relative weight of revenues components between 2024–2026 vs 2023 . . . . . . . . 14
Figure 26 Labor productivity (2000=1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Figure 27 Cumulative growth of labor productivity (2000–2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Figure 28 Share of employment by sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Figure 29 Contribution of sectoral reallocation to labor productivity growth (2000–2019) . . . . . . . . . . . . . . .21
Figure 30 Average contributions to GDP growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Figure 31 Contribution of TFP to growth (2000–2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Figure 32 Comparative firm density (LLCs per 1,000 inhabitants; 2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Figure 33 Density of High Growth Firms (number of HGF per million inhabitants) . . . . . . . . . . . . . . . . . . . . . .23
Figure 34 Misallocation is slowing productivity growth… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Figure 35 …larger firms tend to be less productive. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

List of Tables
Table 1 Key indicators of Morocco’s tourism sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Table 2 Morocco selected economic indicators FY-19–26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

List of Boxes
Box 1 Morocco’s tourism sector in the aftermath of COVID-19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Box 2 FDI in Morocco, a new generation of investments and investors? . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Box 3 Recent World Bank Research on Institutional Trust in Morocco . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Box 4 Medium-term orientation of Morocco’s public finances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

iv MOROCCO ECONOMIC UPDATE – UNLOCKING THE POTENTIAL OF THE PRIVATE SECTOR TO SPUR GROWTH AND JOB CREATION
LIST OF ACRONYMS
AMDIE Investment and Export Development LLC Limited Liability Companies
Agency MEF Ministry of Economy and Finance
BAM Bank-Al-Maghrib MENA Middle East and North Africa
CIT Corporate Income Tax MTI Macro Trade and Investment
CPI Consumer Price Index NDM New Development Model
CRI Regional Investment Center NPL Non-Performing Loans
EMBI Emerging Market Bond Index OECD Organization for Economic Co-operation
EMDEs Emergent markets and Developing and Development
Countries OMTPME Moroccan Observatory of Small and
KNOMAD Global Knowledge Partnership on Medium Enterprises (Observatoire
Migration and Development Marocain de la Très Petite, Petite et
FDI Foreign Direct Investment Moyenne Entreprise)
FLFP Female Labor Force Participation PIT Professional Income Tax
FTA Free Trade Agreement PME Small and Medium Enterprises
GCC Gulf Cooperation Council POV Poverty
GDP Gross Domestic Product SOE State-Owned Enterprise
GEP Global Economic Prospects SME Small and Medium Enterprises)
GoM Government of Morocco UAE United Arab Emirates
HCP High Commission of Planning UMIC Upper Middle-Income countries
HGF High Growth Firms UK United Kingdom
IFC International Finance Corporation US United States
ILO International Labour Organization VAT Value Added Tax
IMF International Monetary Fund WB World Bank
IRA Inflation Reduction Act

v
ACKNOWLEDGEMENTS

T
he Morocco Economic Monitor is a semian- The authors are grateful to Jesko Hentschel,
nual report from the World Bank economic Ahmadou Moustapha Ndiaye (Country Director for
team on recent economic developments and the Maghreb), Eric Le Borgne (Practice Manager,
economic policies. This report presents our current MTI), and Abdoulaye Sy (Lead Country Economist) for
outlook for Morocco. Its coverage ranges from the invaluable comments during the review of this report
macroeconomy, financial stability and private sector as well as senior staff from the Ministry of Finance.
development, to human development. It is intended Special thanks to Ekaterina Georgieva Stefanova
for a wide audience, including policy makers, busi- (Senior Program Assistant, MTI) for her administrative
ness leaders, financial market participants, and the support. The team also expresses its gratitude to the
community of analysts and professionals engaged in Moroccan SME Observatory (Observatoire Marocain
Morocco. de la TPME) for collaborating in the preparation of the
The Morocco Economic Monitor is a product of special focus chapter included in this report. The find-
the Middle East and North Africa (MENA) unit in the ings, interpretations, and conclusions expressed in
Macroeconomics, Trade & Investment (MTI) Global this Monitor are those of World Bank staff and do not
Practice of the World Bank Group. The report was necessarily reflect the views of the Executive Board of
prepared by Javier Diaz-Cassou (Senior Economist, the World Bank or the governments they represent.
MTI) and Amina Iraqi (Economist, MTI) with contri- For information about the World Bank and its
butions from Nicolo Dalvit (Economist, ETIIC), Hind activities in Morocco, please visit www.worldbank.org/
Kadiri (Senior Private Sector Specialist, FCI), Michiel en/country/morocco(English), www.worldbank.org/ar/
Jean M Van Acoleyen (Associate Economist, IFC), country/morocco(Arabic), or www.banquemondiale.
Abel Bove (Senior Public Sector Specialist, GOV), org/fr/country/morocco (French). For questions and
Walid Roudani (Consultant, MTI) and Federica Marzo comments on the content of this publication, please con-
(Senior Economist, POV). tact Javier Diaz Cassou (jdiazcassou@worldbank.org).

vii
EXECUTIVE SUMMARY

Unlocking the potential of the A supportive macroeconomic stance has

private sector to spur growth and contributed to the acceleration of economic
job creation growth. The size of the Moroccan public sector has
grown substantially following the pandemic, sustain-
Economic growth has recovered. The Moroccan ing aggregate demand through recent shocks. The
economy has shown resilience in the face of vari- solid performance of public revenues coupled with a
ous challenges, including a slowdown in the global containment of certain expenditures has allowed the
economy, an inflation shock, and the Al Haouz earth- government to reduce the budget deficit. However,
quake. Despite these obstacles, economic growth Morocco’s fiscal consolidation strategy also relies on
has accelerated, with real output increasing by 3.4 innovative financing operations (sale and lease-back)
percent in 2023. The key drivers of this acceleration which are aimed at actively managing the government’s
have been the rebound of the tourism sector, export- real estate portfolio to finance public investment, but
oriented manufacturing niches that include auto- which also constitute non-recurrent sources of reve-
mobiles and aeronautics, and a recovery of private nues, and which create a stream of future payment obli-
consumption. gations from the State. Morocco’s comparatively rapid
Morocco’s external performance has been disinflation process affirms the effectiveness of Bank
remarkable. Booming FDI announcements have the Al-Maghrib’s cautious response to the recent price
potential to present significant development oppor- shock.
tunities for the country. Country risk indicators pro- But Moroccan firms and households
vide further evidence of the confidence instilled by are struggling to recover from recent shocks.
Morocco internationally. The post-pandemic impulse Morocco is witnessing a pronounced increase in busi-
of some capital-intensive industries is resulting in a ness insolvencies. Despite the acceleration of eco-
substantial change in the composition of Moroccan nomic growth, the performance of the labor market
exports, which are exhibiting an increasing level of remained underwhelming in 2023, with almost 200
complexity. The current account deficit has declined thousand jobs lost in rural areas. Reflecting the cumu-
to its lowest level since 2007. lative impact of recent shocks on welfare, per capita

Executive summary ix
 consumption has only barely returned to pre-pan- This report includes a special focus chapter
demic level. However, the government’s new direct focused on the dynamics of the Moroccan private
social aid program is poised to provide an important sector. It is based on the results of an analysis jointly
relief for poorer households. conducted with the Moroccan Observatory of Small and
The economy is projected to deceler- Medium Enterprises (OMTPME) which exploits a com-
ate moderately in 2024 due to a weak agricul- prehensive database on formal firms. The productivity
tural campaign. Economic growth is projected to performance of the private sector has been lackluster,
fall to 2.9 percent. This is primarily due to a 3.3 per- primarily due to a worsening of allocative efficiency.
cent contraction of agricultural value added given Larger firms tend to exhibit a lower productivity than
adverse weather conditions throughout the 2023– their smaller peers, suggesting that markets are not suf-
24 campaign. Non-agricultural GDP will be more ficiently rewarding more efficient and innovative firms.
resilient, driven by a recovery of domestic demand In addition, Moroccan SMEs struggle to grow, and the
and a stronger industrial sector. Growth is expected density of High Growth Firms remains very low. This is
to pick up from 2025 onwards, under the assump- problematic feature of the private sector given that in
tion of a normal agricultural campaign. The current other settings such firms have been shown to dispro-
account deficit is projected to widen to 1.5 percent of portionately contribute to job creation. Addressing the
GDP in 2024, while the budget deficit is expected to constraints facing the private sector would help over-
gradually return to pre-pandemic levels in the com- come the disappointing job creation capacity that the
ing years. Moroccan economy has exhibited in recent years.

x MOROCCO ECONOMIC UPDATE – UNLOCKING THE POTENTIAL OF THE PRIVATE SECTOR TO SPUR GROWTH AND JOB CREATION
RÉSUMÉ ANALYTIQUE

Libérer le potentiel du secteur privé de complexité croissant. Le déficit du compte cou-

pour stimuler la croissance et la rant a diminué pour atteindre son niveau le plus bas
création d’emplois depuis 2007.
L’orientation de la politique macroécono-
La croissance économique s’est redressée. mique a contribué à l’accélération de la crois-
L’économie marocaine a fait preuve de résilience face sance économique. La taille du secteur public
à divers défis, notamment un ralentissement de l’éco- marocain a considérablement augmenté après
nomie mondiale, un choc inflationniste et le tremble- la pandémie, ce qui a permis de soutenir la
ment de terre de la province d’Al Haouz. Malgré ces demande globale pendant les chocs récents.
obstacles, la croissance économique s’est accélérée, La solide performance des recettes publiques, cou-
avec un une augmentation du PIB de 3,4 pour cent plée à la maîtrise de certaines dépenses, a permis
en 2023. Les principaux catalyseurs de cette accé- au gouvernement de réduire le déficit budgétaire.
lération ont été le rebond du secteur touristique, les Cependant, la stratégie d’assainissement budgétaire
niches manufacturières orientés vers l’exportation du Maroc repose également sur des opérations de
notamment le secteur automobile et aéronautique, financement innovants, (sale and lease-back), visant
ainsi que la reprise de la consommation privée. à gérer activement le patrimoine immobilier de l’État
La performance de l’economie Marocaine pour financer les investissements publics, mais qui
à l’international a été remarquable. Les annonces constituent des recettes non récurrentes et qui créent
de projets d’investissements directs étrangers (IDE) un flux d’obligations de paiement futures de l’État.
sont en plein essor, ce qui pourrait offrir un poten- Le processus relativement rapide de désinflation au
tiel significatif de développement pour le pays. Les Maroc indique que la réponse prudente de Bank
indicateurs de risque pays sont une preuve supplé- Al-Maghrib au choc des prix récent a été efficace.
mentaire de la confiance qu’inspire le Maroc à l’in- Cependant, les entreprises et les ménages
ternational. L’impulsion postpandémique de certaines marocains peinent à se remettre des chocs
industries à forte intensité capitalistique entraîne une récents. Le Maroc connaît une forte augmenta-
modification substantielle de la composition des tion des faillites d’entreprises. Malgré l’accélération
exportations marocaines, qui présentent un niveau de la croissance économique, les performances du

xi
 marché du travail sont restées décevantes en 2023, Ce rapport comprend un chapitre spé-
avec près de 200 mille emplois perdus en milieu cial consacré à la dynamique du secteur privé
rural. Reflétant l’impact cumulé des chocs récents sur marocain. Il s’appuie sur les résultats d’une analyse
le bien-être, la consommation par habitant a à peine menée conjointement avec l’Observatoire Marocain
retrouvé son niveau avant la pandémie. Cependant, des Petites et Moyennes Entreprises (OMTPME), qui
le nouveau programme d’aides sociales directes du exploite une base de données exhaustive sur les entre-
gouvernement s’annonce comme un soulagement prises du secteur formel. Les performances du secteur
important aux ménages les plus pauvres. privé en matière de productivité ont été décevantes,
L’économie devrait ralentir légèrement en principalement en raison d’une détérioration de l’ef-
2024 en raison d’une mauvaise campagne agri- ficience allocative. Les grandes entreprises ont ten-
cole. La croissance économique devrait tomber à 2,9 dance à afficher une productivité inférieure à celle de
pour cent. Cela est dû principalement à une contrac- leurs homologues de plus petite taille, ce qui donne
tion de 3,3 pour cent de la valeur ajoutée agricole en à penser que les marchés ne récompensent pas suf-
raison des conditions météorologiques défavorables fisamment les entreprises plus efficientes et inno-
tout au long de la campagne 2023–2024. Le PIB non vantes. En outre, les Petites et Moyennes Entreprises
agricole sera plus résilient, soutenu par une reprise (PME) marocaines peinent à se développer et la den-
de la demande intérieure et un secteur industriel sité des entreprises à forte croissance reste très faible.
plus solide. La croissance devrait s’accélérer à par- Il s’agit là d’un aspect problématique du secteur privé,
tir de 2025, sous l’hypothèse d’une campagne agri- car dans d’autres contextes, il a été démontré que ces
cole normale. Le déficit du compte courant devrait se entreprises contribuent de manière disproportionnée à
creuser pour atteindre 1,5 pour cent du PIB en 2024, la création d’emplois. Lever les contraintes auxquelles
tandis que le déficit budgétaire devrait progressive- est confronté le secteur privé permettrait de surmon-
ment revenir aux niveaux d’avant la pandémie dans ter la faible capacité de création d’emplois dont l’éco-
les années à venir. nomie marocaine a fait preuve ces dernières années.

xii MOROCCO ECONOMIC UPDATE – UNLOCKING THE POTENTIAL OF THE PRIVATE SECTOR TO SPUR GROWTH AND JOB CREATION
 ‫ملخص تنفيذي‬
‫التجاري‪ .‬وعىل الرغم من تسارع وترية النمو االقتصادي‪ ،‬ظل أداء سوق‬ ‫تحرير إمكانيات القطاع الخاص لتحفيز النمو وخلق‬
‫العمل مخيبا لآلمال يف عام ‪ ،2023‬مع فقدان ما يقرب من ‪ 200‬ألف‬ ‫فرص العمل‬
‫وظيفة يف املناطق الريفية‪ .‬وتجسيدا لألثر الرتاكمي للصدمات األخرية عىل‬
‫الرفاهة‪ ،‬نجد أن نصيب الفرد من االستهالك مل يعد إال بالكاد إىل مستواه‬ ‫النمو االقتصادي قد شهد التعاىف‪ .‬أظهر االقتصاد املغريب القدرة عىل‬
‫ما قبل الجائحة ‪.‬و مع ذلك‪ ،‬فإن الربنامج الجديد للدعم االجتامعي املبارش‬ ‫الصمود يف مواجهة التحديات املختلفة‪ ،‬مبا يف ذلك تباطؤ االقتصاد‬
‫الذي تنفذه الحكومة يقدم تخفيفاً مهامً لألرس األكرث فقرا ً‪.‬‬ ‫العاملي‪ ،‬وصدمة التضخم‪ ،‬وزلزال الحوز‪ .‬وعىل الرغم من هذه العقبات‪،‬‬
‫ومن املتوقع أن يشهد االقتصاد تباطؤا معتدال يف عام ‪2024‬‬ ‫تسارعت وترية النمو االقتصادي‪ ،‬حيث ارتفع الناتج الحقيقي بنسبة ‪3.4٪‬‬
‫بسبب ضعف املحصول الزراعي ‪ .‬ومن املتوقع أن ينخفض معدل النمو‬ ‫يف عام ‪ .2023‬وكانت املحفزات الرئيسية لهذا التسارع هي انتعاش قطاع‬
‫االقتصادي إىل ‪ .2.9٪‬ويرجع ذلك يف املقام األول إىل انكامش القيمة‬ ‫السياحة‪ ،‬وقطاعات الصناعات التحويلية املوجهة نحو التصدير التي‬
‫املضافة الزراعية بنسبة ‪ 3.3٪‬نظرا للظروف املناخية السيئة طوال حملة‬ ‫تشمل السيارات والطريان‪ ، ،‬وكذلك مع انتعاش االستهالك الخاص‪.‬‬
‫‪ .2024–2023‬وسيكون إجاميل الناتج املحيل غري الزراعي أكرث قدرة عىل‬ ‫كان أداء املغرب الخارجي رائعا‪ .‬ميكن أن تتيح اإلعالنات عن‬
‫الصمود مدفوعا بتعايف الطلب املحيل وقوة القطاع الصناعي‪ .‬ومن املتوقع‬ ‫االستثامر األجنبي املبارش فرصا إمنائية كبرية للبالد‪ .‬وتقدم مؤرشات مخاطر‬
‫أن ينتعش النمو اعتبارا من عام ‪ 2025‬فصاعدا‪ ،‬بافرتاض حملة زراعية‬ ‫الدولة دليال إضافيا عىل الثقة التي يبثها املغرب عىل الصعيد الدويل‪.‬‬
‫عادية‪ .‬ومن املتوقع أن يتسع عجز الحساب الجاري إىل ‪ 1.5٪‬من إجاميل‬ ‫ويؤدي التحفيز بعد الجائحة لبعض الصناعات الرأساملية الكبرية بتغيري‬
‫الناتج املحيل يف عام ‪ ،2024‬يف حني يتوقع أن يعود عجز املوازنة تدريجيا‬ ‫جوهري يف تركيبة صادرات املغرب‪ ،‬مع ازدياد مستوى التعقيد‪ .‬وانخفض‬
‫إىل مستويات ما قبل الجائحة يف السنوات القادمة‪.‬‬ ‫عجز الحساب الجاري إىل أدىن مستوى له منذ عام ‪.2007‬‬
‫ويتضمن هذا التقرير فصال خاصا يركز عىل ديناميكيات القطاع‬ ‫وساهم اتخاذ موقف داعم عىل صعيد االقتصاد الكيل يف ترسيع‬
‫الخاص املغريب‪ .‬ويستند هذا التقرير إىل نتائج تحليل أجري باالشرتاك مع‬ ‫وترية النمو االقتصادي‪ .‬وقد منا حجم القطاع العمومي املغريب بشكل كبري‬
‫املرصد املغريب للمقاوالت الصغرية جدا والصغرية واملتوسطة والذي يستغل‬ ‫يف أعقاب الجائحة‪ ،‬مام أدى إىل استدامة الطلب الكيل خالل الصدمات‬
‫قاعدة بيانات شاملة عن الرشكات الرسمية‪ .‬وكان أداء إنتاجية القطاع‬ ‫األخرية‪ .‬وقد مكّن األداء القوي لإليرادات العامة للحكومة‪ ،‬إىل جانب‬
‫الخاص ضعيفا‪ ،‬ويرجع ذلك أساسا إىل تدهور الكفاءة التخصيصية‪ .‬ويبدو‬ ‫السيطرة عىل بعض النفقات من خفض عجز املوازنة‪ .‬غري أن اسرتاتيجية‬
‫أن الرشكات الكبرية تظهر إنتاجية أقل من نظرائها األصغر حجامً‪ ،‬مام‬ ‫ضبط أوضاع املالية العامة يف املغرب تعتمد أيضا عىل عمليات متويل‬
‫كاف الرشكات األكرث كفاءة وابتكارا ً‪.‬‬ ‫يشري إىل أن األسواق ال تكافئ بشكل ٍ‬ ‫مبتكرة (البيع وإعادة التأجري)‪ ،‬تهدف إىل اإلدارة الفعالة لألمالك العقارية‬
‫باإلضافة إىل ذلك‪ ،‬تعاين الرشكات الصغرية واملتوسطة املغربية من صعوبات‬ ‫للدولة لتمويل االستثامرات العامة‪ ،‬ولكنها تشكل إيرادات غري متكررة‬
‫يف النمو‪ ،‬وتظل كثافة الرشكات ذات النمو العايل منخفضة جدا ً‪ .‬وهذه‬ ‫وتخلق تدفقًا اللتزامات الدفع املستقبلية للدولة‪ .‬وتؤكد عملية خفض‬
‫سمة إشكالية للقطاع الخاص بالنظر إىل أنه يف سياقات أخرى تبني أن‬ ‫التضخم الرسيعة نسبيا يف املغرب فعالية استجابة بنك املغرب الحذرة‬
‫هذه الرشكات تساهم بشكل غري متناسب يف خلق فرص العمل‪ .‬وسيساعد‬ ‫لصدمة األسعار األخرية‪.‬‬
‫معالجة القيود التي يواجهها القطاع الخاص يف زيادة القدرة الضعيفة يف‬ ‫ومع ذلك‪ ،‬تعاين الرشكات واألرس املغربية من صعوبة يف التعايف‬
‫خلق فرص الشغل التي أظهرها االقتصاد املغريب يف السنوات األخرية‪.‬‬ ‫من الصدمات األخرية‪ .‬يشهد املغرب زيادة واضحة يف حاالت اإلعسار‬

‫‪xiii‬‬
 1
RECENT ECONOMIC
DEVELOPMENTS
Economic growth has recovered but this figure masks significant variation across sec-
tors: a contraction in phosphates and construction
Despite facing headwinds, economic growth coupled with double-digit growth rates in the value
accelerated in 2023. Last year continued to be added of the automotive and electronics sectors.
marked by challenging conditions, including a wide- The contribution of the manufacturing sector to over-
spread slowdown in the world economy, an inflation all GDP growth increased markedly in the final quar-
shock, lower than average levels of precipitations and ter of 2023 (Figure 2). A continuation of the tourism
the devastating Al Haouz earthquake. Showcasing industry’s rebound (see Box 1) was a major contrib-
once more the resilience of the Moroccan economy, utor to the solid performance of the services sec-
this did not hinder real output growth, which increased
from 1.5 percent to 3.4 percent, in contrast with the
decline observed for the World and most of the coun- FIGURE 1 • A
 s opposed to most other
try groups depicted in Figure 1. Economic dynamism comparator countries, activity
accelerated in 2023…
recovered particularly strongly towards the end of the
year, and some indicators suggest that this positive Real GDP growth (y/y)
momentum has been sustained in the first months 6.2
5.8
of 2024. Nevertheless, the Moroccan economy grew
3.7 4 3.4
3.9
at a slower pace than the average Emerging and 3 3 2.6
Developing Economy (Figure 1). 1.9
1.5 1.6
This growth recovery was uneven across
sectors and components of aggregate demand.
World
Morocco
EMDEs

Oil exporters

Oil importers
MENA

Although climatic conditions remained unfavorable,

agriculture’s value added grew by 1.4 percent, largely
due to a base effect as production partially recov-
2022 2023
ered from the severe drought of 2022. Meanwhile,
industry saw modest overall growth of 1.3 percent, Source: GEP January 2024, World Bank Staff calculations.

1
 FIGURE 2 • …
 the contribution of manufacturing FIGURE 3 • …
 as did that of private consumption
to growth increased towards the end and gross capital formation
of 2023…
Contribution to Real GDP growth
Contribution to Real GDP growth Percentage points
Percentage points 20
20 15
15 10
10
5 5
0 0
–5 –5
–10
–10
–15
–20 –15
–20
Q1-2020
Q2-2020
Q3-2020
Q4-2020
Q1-2021
Q2-2021
Q3-2021
Q4-2021
Q1-2022
Q2-2022
Q3-2022
Q4-2022
Q1-2023
Q2-2023
Q3-2023
Q4-2023

Q1-2020
Q2-2020
Q3-2020
Q4-2020
Q1-2021
Q2-2021
Q3-2021
Q4-2021
Q1-2022
Q2-2022
Q3-2022
Q4-2022
Q1-2023
Q2-2023
Q3-2023
Q4-2023
Primary sector Secondary sector Private consumption Government consumption
Tertiary sector GDP Gross capital formation Net exports

Source: HCP and World Bank staff calculations. Source: HCP and World Bank staff calculations.

tor, which grew by 4.4 percent. On the demand side, projects announced in recent months suggests that
gross capital formation grew by 1.5 percent, display- the country is becoming increasingly attractive for
ing a growing dynamism in the final months of the foreign investors. Low sovereign spreads and a sta-
year (Figure 3). Despite the inflationary shock, private ble currency are additional signs of the confidence
consumption increased by 3.7 percent in 2023. instilled by the Moroccan economy, bolstered by large
external liquidity buffers. Dynamic manufacturing and
Despite a challenging international services exports together with workers’ remittances
environment, the external have contributed to a pronounced improvement in the
performance of the Moroccan current account balance.
economy has been remarkable Booming FDI announcements have the
potential to present significant development
Morocco’s economy is bolstering its position on opportunities for Morocco. Although realized FDI
the global stage. The succession of greenfield FDI inflows contracted in 2023, new large-scale projects

BOX 1: MOROCCO’S TOURISM SECTOR IN THE AFTERMATH OF COVID-19

Tourism is an important contributor to Morocco’s economy, serving as a major source of revenue, employment, and foreign exchange.
According to HCP’s most recent published Tourism Satellite Account, the sector contributes to approximately 7 percent of Morocco’s GDP.a
Its true economic significance is likely to be larger considering tourism’s extensive interlinkages and multiplier effects across various other
sectors. Tourism provides more than half a million direct jobs, about 5 percent of the labor force. As depicted in Table 1, except for the years
of the pandemic, the sector generated foreign exchange receipts that have consistently hovered around 6–7 percent of GDP during the
past two decades, although its participation in total exports has declined. Morocco has sustained an annual bed capacity increase of about
5.3 percent on average, but real spending per tourist has declined.
Morocco’s tourism industry staged a pronounced rebound following the relaxation of COVID-19 travel restrictions. In 2022 tourism arrivals
had already surpassed average levels of the 2010s, while setting an all-time high in 2023 with 14.5 million International tourist arrivals
and MAD 104.7 billion in receipts. Among the reasons that explain this rebound was the pent-up demand that was unleashed following
the end of the pandemic in emitter markets, and the large influx of the Moroccan diaspora that had been blocked from travelling in 2020
and 2021. As a result, the value added of the hospitality sector grew by 68 percent in 2022 and by 23.5 percent in 2023.
(continued on next page)

2 MOROCCO ECONOMIC UPDATE – UNLOCKING THE POTENTIAL OF THE PRIVATE SECTOR TO SPUR GROWTH AND JOB CREATION
 BOX 1: MOROCCO’S TOURISM SECTOR IN THE AFTERMATH OF COVID-19 (continued)

TABLE 1 • Key indicators of Morocco’s tourism sector

2000–2010 2010–2019 2020 2021 2022 2023

Tourist arrivals (million) 6.2 10.5 2.8 3.7 10.9 14.5
o/w Moroccan diaspora 3.0 5.0 1.4 3.4 5.8 7.3
Tourist receipts (% of GDP) 6.6% 6.2% 3.2% 2.7% 7.1% 7.2%
Tourist receipts (% of exports 23.4% 19.6% 10.2% 8.2% 15.7% 16.7%
of goods and services)
Average spending per tourist 7,379 5,766 11,722 8,132 7,124 5,613
(Real Dirhams)
Bed capacity 115,571 223,877 276,546 279,635 283,283 290,833

Despite recent trends, Morocco has not increased its market FIGURE 4 • M
 oroccan share of Tourism,
share among competitors in the Mediterranean basin. World 2010–2023
Tourism Organization statistics show that Morocco managed to
slightly increase its global market share in 2022 and 2023, from Selected Mediterranean Countries: Spain, Portugal, France, Italy,
Greece, Turkey, Egypt, Tunisia
0.9 percent of total cross-border tourists prior to the pandemic
4.0
to about 1.1 percent. Its market share in the Mediterranean basin
3.5
remained unchanged at close to 3.4 percent, suggesting that 3.0
Market share

Morocco did not outperform its closer competitors in these years 2.5
(Figure 4). According to the World Tourism Organization, global 2.0
tourism is forecasted to return to pre-pandemic levels in 2024, after 1.5
which annual growth figures are likely to begin reverting to long- 1.0
term trends. Unless Morocco succeeds at increasing its market 0.5
share, the performance of the tourism sector should be expected 0.0
2011

2021
2022
2012
2010

2014

2017
2018
2019
2020

2023
2013

2015
2016
to follow a similar path.

Share of global tourism

Share of Mediterranean tourism

Source: Office des Changes, Ministry of Tourism, Observatoire du Tourisme, IFS, World Tourism Organization, World Bank staff calculations.
Note: share of Mediterranean tourism market includes : Spain, Portugal, France, Italy, Greece, Turkey, Egypt, Tunisia.
a
Source: Compte satellite du tourisme de 2019, HCP.

have continued to be announced, suggesting that Taiwan, Singapore, and various Chinese provinces.
Morocco could be about to witness a surge in for- Beyond ensuring that announced FDI projects end
eign investment (Box 2). Conventional wisdom holds up materializing, Moroccan authorities should there-
that FDI can bolster economic growth and develop- fore prioritize policies aimed at absorbing the pos-
ment by bringing in capital, advanced technologies, itive spillovers that could emanate from upcoming
and managerial experience, enhancing the produc- investments. This would require a renewed focus on
tivity and competitiveness of the recipient economy. the infusion of technologies and knowhow brought by
However, the vast empirical literature produced on the transnational firms, on developing the domestic value
subject provides a more nuanced assessment, and chains that have the greatest potential to source for-
for the most part has failed to find a conclusive causal eign investors and, more generally, on addressing the
link between FDI and growth in developing countries structural constraints facing Moroccan firms, espe-
(Bénétrix, Pallan and Panizza, 2023). Nevertheless, cially small and medium enterprises (see Chapter 3).
there are successful cases in which the contribution Country risk indicators provide further evi-
of FDI to development is largely recognized, such as dence of the confidence instilled by Morocco

Recent Economic Developments 3

 BOX 2: FDI IN MOROCCO, A NEW GENERATION OF INVESTMENTS AND INVESTORS?

Global geoeconomic fragmentation, coupled with Morocco’s unique advantages in terms of geographic location, trade agreements,
renewable energy potential, sound infrastructure, and stable environment, may be driving a fundamental shift in the country’s FDI attraction
potential. This box highlights some indicators suggesting that this change is ongoing: a large increase in announced greenfield FDI projects,
also from non-traditional investors, and a shift in the composition of investments. The push factors that may be driving these trends are
recurrent supply-chain disruptions and rising geopolitical tensions, which are resulting in an increased interest on the part of transnational
firms to build operational resilience through reshoring or friend-shoring. The pull factors include Morocco’s geographic proximity to major
markets, a sound macroeconomic management and infrastructure system, recent government efforts to upgrade the country’s investment
promotion landscape,a a vast renewable energy potential and a diversified network of Free Trade Agreements (FTAs). In fact, Morocco
stands out as the only African nation with FTAs with the EU, Gulf Cooperation Council (GCC) and the US, the last of which is allowing
investors to tap into incentives of the Inflation Reduction Act (IRA), notably for selected supply chains in battery components. Within this
context, Morocco seems to be emerging as an attractive gateway for the localization of services and the finishing and re-exports of goods
to markets in Africa, Europe, the United States, and the Middle East.
Recent realized official gross FDI inflows have declined following the pandemic. According to the Office des Changes, gross FDI inflows
averaged 3.2 percent of GDP from 2012 to 2022. These inflows dipped to 2.3 percent of GDP in the initial year of the pandemic but
recovered to 3 percent of GDP in 2022, before adjusting to 2.2 percent of GDP in 2023. By the end 2021, European nations and the
UAE made up over 60 percent and approximately 20 percent of the FDI stock, respectively. Manufacturing accounted for 24 percent
of this stock (of which 37 percent in the automotive sector), followed by real estate (19 percent), telecommunications (12 percent) and
tourism (9 percent). More recent figures indicate some shifts in the origin and the sectoral composition of FDI. In 2022–23 the United

FIGURE 5 • Stock by country (2021) FIGURE 6 • Flows (2022–2023) by country

$80 100%
90%
$70
France 31%
80%
$60
France 31% 70%
$50
USA 15%
Billions

60%
$40 50%
UAE 20% UAE 9%
$30 40% UK 8%
Spain 8% Spain 6%
$20 30%

$10 Other 51% 20%

Other 31%
10%
$0
FDI Stock 0%

FIGURE 7 • Stock by sector (2021) FIGURE 8 • Flows (2022–2023) by sector

$80 100%
90%
$70 Industry 24% Industry 35%
80%
$60
70%
$50 Real estate 19%
Billions

60%
$40 Real estate 21%
Telco 12% 50%
$30 40% Transport 7%

$20 30%
Other 45%
$10 20% Other 37%
10%
$0
FDI Stock 0%

(continued on next page)

4 MOROCCO ECONOMIC UPDATE – UNLOCKING THE POTENTIAL OF THE PRIVATE SECTOR TO SPUR GROWTH AND JOB CREATION
BOX 2: FDI IN MOROCCO, A NEW GENERATION OF INVESTMENTS AND INVESTORS? (continued)

States became the second largest investor, representing 15 percent FIGURE 9 • G

 reenfield FDI announcements
of total FDI compared to a historical 5 percent share in the FDI surged
stock. Additionally, the participation of industrial FDI increased to
35 percent, with particularly large investments in the chemical and $25
pharmaceutical sectors.
$20
However, FDI announcements are surging, marked by the robust
entry of China as a major investor in Morocco. Announced $15

Billions
greenfield FDI by international firms has more than quadrupled,
from US$3.8bn in 2021 to US$15.6bn in 2022 and US$20.4bn in $10
2023. China has emerged as the new leading investor, accounting
for 29 percent of all announced greenfield FDI capital expenditures $5
for 2022–2023, while European countries and the UAE accounted
for 53 and 6 percent, respectively, and the US for only 1 percent. $0

2021

2022
2014

2015

2016

2017

2018

2019

2020

2023
New technologies and sectors are emerging as well. Renewables
remain important, as large new scale green hydrogen projects have
been announced. In parallel, electronic manufacturing became Announced Official
the second largest target industry (19 percent), driven by battery
component production for electric vehicles. Data also shows that Source: FDI Markets, a service from the Financial Times Ltd., and Office des
the average capital expenditure per announced project surged to Changes, calculations and analyses by IFC.
around US$210 million over 2022–2023, compared to US$48 million in over 2018–2019.
Morocco’s strong performance in attracting greenfield FDI announcements in 2023 stands in contrast with the general slowdown observed
in Africa, while also surpassing that of other nearshoring destinations. The total value of announced capital expenditures across the
continent decreased by almost 10 percent in 2023, from US$196bn in 2022 to US$176bn. Morocco’s share in Africa in terms of value of
FDI announcements has therefore jumped to almost 10 percent over 2022–2023, compared to around 5 percent over 2018–2019. As a
result, the country entered the top three of African destinations for cumulative FDI announcement value since 2014. Turkey and Mexico,
two comparator nearshoring destinations, did not record a similar sustained surge in incoming greenfield FDI announcements over both
2022 and 2023 (Figure 11).

FIGURE 10 • S hare of Morocco in total FIGURE 11 • F

 DI Morocco outperformed peers
announced FDI in Africa almost (FDI announcements as a share
doubled since 2018–2019 of GDP)
(% of total FDI announcements
in Africa) 0.16

0.14

0.12

0.10
2022–2023
0.08

0.06

0.04

0.02
2018–2019
0.00
2021

2022
2014

2015

2016

2017

2018

2019

2020

2023

Morocco Mexico Turkey Vietnam

0.00 0.02 0.04 0.06 0.08 0.10 0.12
Source: FDI Markets, a service from the Financial Times Ltd., and Office des Source: FDI Markets, a service from the Financial Times Ltd., and Office des
Changes, calculations and analyses by IFC. Changes, calculations and analyses by IFC.

a
The Ministry of Investment, Convergence and Evaluation of Public Policies was established in 2021 to proactively raise FDI in strategic sectors. Next to this, the authorities
updated the Investment Charter in 2022, expanding incentives for foreign investment, and institutional changes have ensured a closer integration between Morocco’s
Investment and Export Development Agency (AMDIE) and the 12 Regional Investment Centers (CRIs).

Recent Economic Developments 5

 FIGURE 12 • The market’s perception on FIGURE 13 • …
 bolstered by the country’s solid
Morocco’s country risk has external liquidity buffers
improved markedly…
Reserves in months of imports-2023
EMBI Morocco (Latest available)
9
500
450 8
400 7
350 6
300 5
250 4
200
3
150
2
100
50 1
0 0
2019 2020 2021 2022 2023 Turkey Egypt Tunisia Kuwait Oman Morocco Jordan

Source: HCP and World Bank staff calculations. Source: HCP and World Bank staff calculations.

internationally. The EMBI spread is comparatively since the year that preceded the COVID-19 pandemic,
low and has compressed significantly over recent while electronics’ exports have progressed by close
quarters, from a peak of 441 basis points in mid-July to 129 percent (Figure 14). As a result, the participa-
2022 to 186 basis points on average in the first quar- tion of these two product groups over total exports
ter of 2024, close to pre-pandemic levels (Figure 12). has increased from 31.8 to 38.6 percent. In 2023,
This has eased the sovereign’s access to international the strong dynamism of these exports was offset by
capital markets, as evidenced by the large oversub- the underperformance of phosphates (34.1 percent
scription of recent bond issuances even when they decline) after an extraordinary 2022. Overall, these
have coincided with phases of uncertainty in the changes in the composition of Morocco’s export bas-
global economy, as was the case of that of March ket suggest that its economy is moving up in the com-
2023. The market’s trust in the Moroccan economy is plexity spectrum following the COVID-19 pandemic,
likely to have been bolstered by strong external liquid- which has been shown to be a powerful engine for
ity buffers. Indeed, as of February 2024, Morocco was long-term development (Hidalgo and Haussman,
among the MENA economies with the largest stock 2009). On the other hand, the emerging export-ori-
of international reserves (Figure 13) and has a long ented industries are highly capital intensive which
track record sustaining a stable exchange rate with- could contribute to explain the disappointing job-
out resorting to foreign exchange market interven- creation performance of the Moroccan economy
tions. The USD 5 billion made available under the (see below).
Flexible Credit Line, the IMF precautionary facility that The current account deficit has declined to
is reserved for countries with very strong fundamen- its lowest level since 2007. It closed 2023 at just 0.6
tals, has added another layer of protection against percent of GDP, against 3.6 percent of GDP in 2022
external shocks. In this context, Standard & Poor’s and an average of 3.7 percent over the past decade.
has recently revised Morocco’s outlook to BB+/B, This improvement was primarily driven by the dyna-
suggesting that progress is being achieved towards mism of key services and merchandise exports and by
regaining investment grade, which was lost during the a 20.4 percent reduction in energy imports, the equiv-
Covid-19 pandemic. alent of almost 2.2 percent of GDP. Remittances have
The post-pandemic impulse of some capi- become an increasingly important component of the
tal-intensive industries is resulting in a substantial current account as well as a crucial financial lifeline
change in the composition of Moroccan exports. helping Moroccan households navigate through turbu-
Transport equipment exports are up by 76.9 percent lent times. Gross remittances have amounted to about

6 MOROCCO ECONOMIC UPDATE – UNLOCKING THE POTENTIAL OF THE PRIVATE SECTOR TO SPUR GROWTH AND JOB CREATION
FIGURE 14 • The economic complexity of FIGURE 15 • The current account balance
Morocco’s export basket is narrowed in 2023
increasing
60% 0
Percentage change in the value of exports (2019–2023)

–0.6
–1

–0.7
As percentage of GDP

As percentage of GDP
40%

–0.4
Change in participation over total exports in brackets

–1.1
–2.3
–2.6

–2.7

–2.7
–2

–1.7
–1.2
20%
Electronics and electricity (+1.9%) –3

–3.0
0%
Automobile (+4.9%)

–3.6
–4
–20%

–4.5
Phosphates and derivatives –5

–6.5
(+0.5%)

–4.6
–4.5
–40% –6
Total exports
–60% –7
Agri and food industry (–2.5%)

Q1-2020
Q2-2020
Q3-2020
Q4-2020
Q1-2021
Q2-2021
Q3-2021
Q4-2021
Q1-2022
Q2-2022
Q3-2022
Q4-2022
Q1-2023
Q2-2023
Q3-2023
Q4-2023
Textile and leather (–2.2%)
Aerospace (–1.1%) Trade balance Service balance
0 20 40 60 80 100 120 140 Current transfers Current account balance (rhs)

Source: Office exchange and World Bank staff calculations. Source: Office exchange and World Bank staff calculations.

8 percent of GDP over the past three years against ment, gross capital formation as reported in national
5.2 percent of GDP prior to the pandemic. Last year accounts’ statistics has barely recovered to pre-pan-
they were enough to cover 93 percent of the trade def- demic levels. This suggests that despite the ambitious
icit, up from 67 percent in 2019 (81 percent in 2020 targets set by the New Development Model, the par-
and 2021). According to the World Bank KNOMAD ticipation of the private sector in total investment has
database, Morocco has become the fourteenth larg- declined further in recent years, justifying the analysis
est recipient of remittances in absolute terms (exclud- presented in Chapter 3.
ing high income countries), and the eleventh LMIC The solid performance of public revenues
with the highest remittances as a share of GDP. The has allowed the government to reduce the bud-
increase in remittances observed in Morocco since get deficit. Total revenues have increased by 12.7 per-
the pandemic has far exceeded global trends (74 per- cent in real terms between 2019 and 2023, which led
cent vs. an 18 percent increase). to an increase in their share in GDP from 20.4 per-
cent to 22.7 percent. Tax revenues have contributed
to 71 percent of that increase in total revenues, led by
A supportive macroeconomic stance the expansion of VAT collection (+19 percent) and CIT
has contributed to the acceleration (+21 percent). This reflects the ongoing implementa-
of economic growth tion of the tax reform, which has prioritized the broad-
ening of the tax base and the elimination of several
The size of the Moroccan public sector has grown distortions in the structure of the CIT and the VAT. In
substantially following the pandemic, sustain- addition, the tax administration is leading an effort to
ing aggregate demand through recent shocks. combat fraud and tax evasion, and the outcomes are
Between 2019 and 2023 central government spend- beginning to show in the data. The progression of non-
ing increased by 16 percent in real terms, against tax revenues has been even more pronounced in rel-
an expansion of 5.4 percent in Morocco’s GDP ative terms (+50 percent between 2019 and 2023),
(Figure 16). As a result, the relative size of the cen- led among others, by an increasing resort to sale and
tral government increased from 23.7 to 27.1 percent of lease-back operations (the so-called innovative financ-
GDP. Public investment was particularly dynamic after ing operations), which since 2020 have generated an
2021, in part reflecting the government’s effort to con- accumulated US$ 6.2 billion for the central govern-
front the prolonged drought with the deployment of ment. These operations imply the transfer of public
new water infrastructure. In contrast with public invest- assets off the central government balance sheet and

Recent Economic Developments 7

 FIGURE 16 • The size of the public sector has FIGURE 17 • …
 but dynamic revenues are keeping
increased substantially since the budget deficit on a downward
COVID-19… trajectory

Percentage change in public revenues and expenditures in real terms 80 0

(2019–2023)
70 –1
Growth

72.2

71.5
Real GDP

69.5
69.4
60 –2

As percentage of GDP

As percentage of GDP
Total revenues

60.4
60.0

60.2

60.3
58.3
Non tax revenues 50 –3
Revenues

Tax revenues

–3.4
Customs duties 40 –4

–3.2

–4.3
CIT

–3.6
–4.4
30 –5

–4.5
VAT

–7.1

–5.4
20 –6

–5.5
PIT
Total expenditures 10 –7
Expenditures

Investment
Goods & services 0 –8

2021

2022
2020
2015

2016

2017

2018

2019

2023
Compensation
Interests
0 20 40 60 Central government debt Fiscal deficit (rhs)

Source: HCP and World Bank staff calculations. Source: HCP and World Bank staff calculations.

hence should not be considered recurrent sources cycle early (Figure 19), which has minimized the dis-
of revenue. In addition, the government continues ruptions that a larger increase in interest rates could
to raise revenues through special treasury accounts have had on the domestic economy. With this rapid
for specific purposes, such as the response to the Al easing of price pressures, Morocco’s monetary pol-
Haouz earthquake (MAD 20 billion collected in 2023). icy rate has recently returned to positive territory if
Overall, this has allowed the government to progres- using the most recent annual inflation data point
sively reduce the budget deficit, from a peak of 7.1 per- and is close to doing so if using three-year inflation
cent of GDP during the first year of the pandemic to 4.3 expectations.
percent of GDP in 2023, broadly stabilizing public debt
as a ratio of GDP (Figure 17). But Moroccan firms and households
Morocco’s comparatively rapid disinfla- are struggling to recover from recent
tion process affirms the effectiveness of Bank shocks
Al-Maghrib’s cautious response to the recent
price shock. Headline inflation declined by almost Despite the general improvement in economic
10 percentage points between February 2023 and conditions, several indicators suggest that firms
February 2024. Consistent with the supply-driven and households remain under stress. Business
nature of the shock, easing price pressures were ini- insolvencies are on the rise, suggesting that a growing
tially led by energy and food, and gradually become number of firms is proving unable to cope with the
more widespread. Indeed, core inflation has declined cumulative impact of recent shocks. Inflation has
from a peak of 8.5 percent in February 2023 to eroded households’ real disposable income and job
2.4 percent in March 2024 (latest available data at creation remains weak. In this context, the ongoing
the time of writing). Notably, the recent decline in deployment of the government‘s new targeted cash
inflation has been more abrupt in Morocco than in transfer (the Direct Social Aid Program) will provide
most other MENA countries (Figure 18). It has also significant relief for poorer households.
been faster than in advanced economies, where the Morocco is witnessing a pronounced
inflationary shock had a demand-driven component increase in business insolvencies. The latest
that was absent in Morocco. This vindicates BAM’s annual report from the Moroccan Observatory of
decision to pause the monetary policy tightening SMEs (OMTPME) shows a significant increase in the

8 MOROCCO ECONOMIC UPDATE – UNLOCKING THE POTENTIAL OF THE PRIVATE SECTOR TO SPUR GROWTH AND JOB CREATION
FIGURE 18 • t he disinflation process has been FIGURE 19 • …
 despite BAM’s modest monetary
comparatively fast in Morocco… policy tightening

14 Increase in policy rate/Inflation

Global supply distruptions in percent
12 20 40
10 18 35
Percent year-on-year

16
8 30
14
6 12 25
4 10 20
8 15
2 6
10
0 4
2 5
–2 0 0

Jordan

FED

ECB

Morocco
Egypt

Kuwait

Tunisia

Algeria
UK
–4
Jan-21
Mar-21
May-21
Jul-21
Sep-21
Nov-21
Jan-22
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
May-23
Jul-23
Sep-23
Nov-23
Jan-24
Jordan Tunisia Algeria Morocco Cumulative increase in policy rate (since February 2022)
Kuwait Bahrain Saudi Arabia Average inflation in 2023 (rhs)

Source: HCP and World Bank staff calculations. Source: HCP and World Bank staff calculations.

FIGURE 20 • Credit to the private sector slowed FIGURE 21 • …

 especially for short-term liquidity
in 2023… loans

30 9.5 20
25
9.0 15
Percent year-on-year

Percent year-on-year

20
15 8.5 10
10
8.0 5
5
0 7.5 0
–5
7.0 –5
–10
–15 6.5 –10
Feb-19
Aug-19
Feb-20
Aug-20
Feb-21
Aug-21
Feb-22
Aug-22
Feb-23
Aug-23
Feb-24

Feb-19
Jul-19
Dec-19
May-20
Oct-20
Mar-21
Aug-21
Jan-22
Jun-22
Nov-22
Apr-23
Sep-23
Feb-24
Ratio of NPLs (rhs) Credit to public sector Working capital Equipment loans
Credit to private sector Real estate loans Consumer loans

Source: Bank-Al-Maghrib and World bank staff calculations. Source: Bank-Al-Maghrib and World bank staff calculations.

number of firms going through a formal dissolution (Figure 20). Most notably, short-term (working capital)
process in recent years, up by 8.5 and 28 percent in lending abruptly shifted from double digit growth rates
2021 and 2022 respectively when compared to pre- to a pronounced contraction (Figure 21). Combined
pandemic levels. According to Allianz Trade Global with their structurally low capitalization levels, this may
Insolvency Report this trend continued through 2023, have left a growing number of firms unable to bridge
turning Morocco into one of the countries with the liquidity shortages resulting from recent shocks.
fastest acceleration of business insolvencies among Despite the acceleration of economic
those included in their database (Allianz Trade, 2024). growth, the performance of the labor market
A lesser availability of financing may have contrib- remained underwhelming in 2023. Even though
uted to recent insolvency trends. Indeed, credit to agricultural value added expanded in 2023, rural areas
the private sector slowed in 2023, in contrast with the suffered a net loss of 198 thousand jobs, only partly
double-digit expansion of credit to the public sector compensated by the creation of 41 thousand jobs in

Recent Economic Developments 9

 FIGURE 22 • L
 abor markets indicators have FIGURE 23 • …
 the responsiveness of job creation
worsened significantly… to economic activity has declined
Activity and unemployment rate Labor elasticity of economic activity
(in percent)
52 15
13 Total
50
11
48 9
7
Urban
46 5
3
44
1
42 –1 Rural
Q4-2007
Q4-2008
Q4-2009
Q4-2010
Q4-2011
Q4-2012
Q4-2013
Q4-2014
Q4-2015
Q4-2016
Q4-2017
Q4-2018
Q4-2019
Q4-2020
Q4-2021
Q4-2022
Q4-2023
–1.0 –0.8 –0.6 –0.4 –0.2 0.0 0.2 0.4 0.6 0.8

Activity rate Unemployment rate (rhs) 2000–09 2010–19 2020–2023 2023

Source: HCP and World bank staff calculations. Source: HCP and World bank staff calculations.
Note: The labor elasticity of employment is calculated as the ratio of the percentage Note: The labor elasticity of employment is calculated as the ratio of the percentage
change in total employment from one year to the next to the percentage change in real change in total employment from one year to the next to the percentage change in real
GDP over the same period. Urban Employment Elasticity is determined by dividing the GDP over the same period. Urban Employment Elasticity is determined by dividing the
percentage change in urban employment by the percentage change in non-agricultural percentage change in urban employment by the percentage change in non-agricultural
GDP. Similarly, Rural Employment Elasticity is calculated by dividing the percentage GDP. Similarly, Rural Employment Elasticity is calculated by dividing the percentage
change in rural employment by the percentage change in agricultural GDP. change in rural employment by the percentage change in agricultural GDP.

urban areas. In this context, inactivity continues to labor market surveys (in particular, non-salaried rural
rise in Morocco, and by the first quarter of 2024 had workers, which concentrated most of the job losses in
reached 57.4 percent (53.3 percent in 2017), dispro- 2023) is misreporting their real work situation for fear
portionately affecting women (81.7 percent) and young of losing their eligibility to non-contributory health insur-
Moroccans (78.5 percent). Unemployment is also on ance program deployed as part of the ongoing reform.
the rise, having peaked at 13.7 percent (17.6 percent in But the long-term trend observed in employment elas-
urban centers), more than 4 p.p. higher than before the ticities also suggests that some of the activities that
pandemic. In this context, the government has empha- have driven growth in recent years, like export-oriented
sized that job creation will be atop of its agenda during agriculture or the new thriving manufacturing niches
the second half of the current legislature. described above, have a lower labor intensity than tra-
The long-term trends observed in the ditional sectors. This structural transformation process
labor market reflect the weakening growth per- may also contribute to explain the ongoing decline in
formance of the Moroccan economy, but also a female labor force participation. Indeed, there is evi-
decline in its labor intensity. As discussed in greater dence that the capital-intensive industries that are
detail in Chapter 3, real GDP growth has tended to driving manufacturing sector growth have a higher
decline since the turn of the Century, especially with male-to-female employment ratio than the light manu-
the succession of overlapping exogenous shocks that facturing on which Morocco tended to specialize in the
followed the COVID-19 pandemic. A compounding past (Acevedo and Robertson, 2023)1.
factor has been that the elasticity of employment to
growth, a measure of the responsiveness of job cre- 1
Although focusing on three countries (the Arab Republic
ation to economic activity, has also declined substan- of Egypt, Morocco, and Tunisia), this study gives us
broader lessons on how to solve the apparent puzzle of
tially (Figure 23). The negative value observed in 2023
greater exposure to trade not being followed by greater
for that indicator, however, constitutes a clear anom- labor market outcomes in the region. It points out, among
aly in the historical series. This raises the question of other factors, how market segmentation by gender
whether a significant number of respondents to the shapes the effects of trade shocks like higher exports.

10 MOROCCO ECONOMIC UPDATE – UNLOCKING THE POTENTIAL OF THE PRIVATE SECTOR TO SPUR GROWTH AND JOB CREATION
 BOX 3: RECENT WORLD BANK RESEARCH ON INSTITUTIONAL TRUST IN MOROCCO

There is a well-established literature on the importance of trust in government and public action for economic development.a Among other
channels, higher levels of trust have been found to positively associated with private investment and economic growth, social cohesion, and
wellbeing. Trust is also at the core of Morocco’s New Development Model (NDM), which prone to o “Free the energies and restore trust to
accelerate the march towards progress and prosperity for all”.
The World Bank has recently published a study on trust in Morocco,b based on a phone survey of about 6,000 respondents, making the
data publicly available.c Some of the key takeaways produced by that analysis are the following:
1. Trust levels vary considerably between individuals, with males and older individuals more likely to trust institutions than women and
younger citizens. Low- and high-income individuals also express higher trust in institutions than citizens in the middle-income group.
2. Institutions tasked with ensuring law and order (justice, police, army) are endowed with higher levels of trust than executive or legislative
institutions, a dynamic that is also observed in other countries of the MENA region.
3. Trust is correlated with citizen’s levels of optimism. Individuals with higher levels of confidence in government are more likely to perceive
that they are free and have control over their own lives, and that their country and society can change through their individual choices
and actions.
4. Individuals with higher levels of institutional trust are more likely to be willing to pay redistributive taxes than citizens with low levels of
trust.
5. Higher levels of trust increase citizen’s willingness to cooperate, and thus facilitates the implementation of public policies. This was
particularly apparent during the COVID-19 pandemic, as citizens who trusted the government were more likely to be willing to get
vaccinated.

a
See Kumagai and Iorio, 2020 for a review of the literature.
b
https://www.worldbank.org/en/country/morocco/brief/maghreb-technical-notes.
c
https://microdata.worldbank.org/index.php/catalog/6187.

Reflecting the cumulative impact of recent increased the amount of financial aid directed at
shocks on welfare, per capita consumption has Moroccan households, while improving its targeting
only barely returned to pre-pandemic level. Real through the Unified Social Registry and tackling the
household consumption per capita declined by complexity and fragmentation of previous social pro-
6.6 percent during the first year of the pandemic, and tection schemes. Once fully deployed in 2026, it will
partially recovered in 2021. It contracted again in 2022 grant monthly payments of 200 dirhams per children
(by 1 percent) as households’ real purchasing power with a minimum of 500 dirhams per family (equiva-
was eroded by inflation, only returning to pre-pan- lent to US$50), including those without children.
demic levels in 2023. Between 2019 and 2023 house- Additionally, a sum of 2,000 dirhams (US$ 200) will
hold consumption has increased by just 0.5 percent, be disbursed for the birth of the first child, and 1,000
as compared to a cumulated growth of 6 percent in dirhams for each subsequent one. The new scheme
the previous four years (2015–2019). Moreover, these is comparatively generous, extending benefits to the
aggregate trends are unlikely to be homogenously dis- first six deciles of the income distribution. The total
tributed across levels of income. Indeed, as discussed financial assistance mobilized through the new pro-
in previous editions of this report, given that food items, gram is set to offer significant relief to mitigate the
for which price pressures have been more intense, social impact of recent and future shocks. It is hence
absorb a higher share of poor and vulnerable house- expected to result in a significant improvement of
holds’ consumption baskets, the adverse impact of the income distribution and poverty indicators. Between
shock is likely to have been higher on this group. December 2, 2023 and March 31, 2024, more than
The government’s new direct social aid 3.5 million families received direct aid. Additionally, at
program is poised to provide an important relief least 1.4 million childless families received a monthly
for poorer households. The new cash transfer has lump sum allowance of 500 dirhams.

Recent Economic Developments 11

 2
OUTLOOK AND RISKS

Outlook mate the harvest to be less than 40 million quin-

tals for the 2023–24 season, a significant drop from
The Moroccan economy is expected to experi- the 55 million quintals recorded the previous year.
ence a moderate slowdown in 2024 and to return Consequently, it is expected that the agricultural
to a more dynamic growth trajectory in 2025. value added will decrease by 3.3 percent in 2024.
Overall GDP growth is projected at 2.9 percent in This downturn is likely to negatively influence the
2024, pulled by the expected contraction of the agri- incomes and consumption of rural households and
cultural sector, which continues to be impacted by a heighten the nation’s dependence on cereal imports
persistent and severe drought. Conversely, the non- to satisfy local demand.
agricultural sector is expected to accelerate, bol- Non-agricultural growth is expected to
stered by the industrial sector’s robust performance, firm-up to 3.7 percent in 2024, underpinned by
along with a recovery in household consumption and a robust industrial sector, which offsets a slight
private investment. Assuming that cereal production deceleration in the services sector. The first four
returns to normal levels in the subsequent years, it months of 2024 have seen automobile and aeronau-
is projected that economic growth will pick up, to 4 tics exports expand at a double-digit rate, a trend that
percent in 2025 and average 3.6 percent over the is anticipated to continue throughout the year. The
medium term. phosphates and fertilizers sector is also expected to
The agricultural sector is set to contract see an upswing in 2024, following a lackluster per-
in 2024 due to adverse weather conditions. The formance in 2023. Moreover, a notable increase
season began with sparse and sporadic rainfall, fol- in cement sales—3.5 percent year-on-year in the
lowed by exceptionally high temperatures early in January–April period and a sharp 21 percent rise in
2024, which have severely impacted the autumn and April alone—indicates a strengthening in construc-
winter crops. Although recent months have seen tion activity. This upturn will likely be spurred by proj-
increased rainfall, benefiting some of the spring ects related to the upcoming African Cup of Nations
crops, this has not been sufficient to offset a sharp in 2025/2026 and the 2030 World Cup. Additionally,
decline in cereal production. Projections now esti- the launch of the High Atlas Development Agency is

13
 BOX 4: MEDIUM-TERM ORIENTATION OF MOROCCO’S PUBLIC FINANCES

This box summarizes key trends in the medium-term budgetary framework (2024–2026). Overall, the government’s medium-term budget
aims at striking a balance between restoring fiscal margins, reinforcing the social safety net, and executing major structural reforms. It
targets a reduction of the budget deficit to 3 percent of GDP in 2026 (close to the average deficit in the three years that preceded the
pandemic), and a reduction of the primary deficit to less than 1 percent of GDP.
On the expenditure side, the government is reallocating subsidies to fund the Direct Social Assistance Program and intends to leverage
public-private partnerships to curb investment spending. Significant changes in the composition of public spending are expected for
2024–2026 (Figure 24). The government has started a new cash transfer program costing 1.6 percent of GDP annually on average.
It will be partly funded by savings from the phasing out of certain subsidies that have already began (the price of the 12 kg butane gas
bottle increased by 25 percent in May 2024) and the consolidation of pre-existing social programs. Employee compensation is set to
rise by 4.5 percent annually until 2026, but its projected GDP share will decrease slightly. Investment spending will fall by 3.3 percent
annually, with PPPs expected to play a growing role in financing infrastructure and environmental projects. As a result, central government
investment is projected to fall to 6.2 percent of GDP, down from 7.7 percent. Overall, public spending growth is limited to an average
of 3.1 percent annually over the next three years. This would reduce the size of the central government, from 26.9 percent of GDP in
2021–2023 to 25.5 percent in 2024–2026.
On the revenue side, the government is expediting tax reforms, with a focus on Value-Added Tax (VAT) adjustments in 2024. Total revenues
as a share of GDP are expected to moderately increase from 21.8 percent of GDP in 2021–2023 to 22 percent in 2024–2026. The
ongoing tax reform is expected to lead to a substantial increase in the participation of the VAT over total revenues, which will compensate
for a reduction in Corporate Income Tax (CIT) revenues resulting from the measures included in the 2023 budget law (Figure 25). Non-tax
revenues will rely mainly on asset recycling operations, which are expected to mobilize close to 2.2 percent of GDP annually between 2024
and 2026 (35 billion dirhams).

FIGURE 24 • Changes in the relative weight of FIGURE 25 • Changes in the relative weight of
expenditure components between revenues components between
2024–2026 vs 2023 2024–2026 vs 2023

Changes in relative weight of expenditures components between Changes in relatve weight of revenues components between
2024–2026 vs 2023 2024–2026 vs 2023
Non-tax 1.0
Investment –4.3
revenues

Custom –0.2
Interests 1.6
tariffs

Subsidies –4.8 VAT 1.8

Goods and
2.9 PIT 0.1
services

Compensation
1.3 CIT –1.2
of employees

–6.0 –5.0 –4.0 –3.0 –2.0 –1.0 0.0 1.0 2.0 3.0 4.0 –1.5 –1.0 –0.5 0.0 0.5 1.0 1.5 2.0
Source: MEF and WB staff calculations. Source: MEF and WB staff calculations.

poised to expedite rebuilding in regions impacted by Domestic demand is anticipated to

the Al Haouz Earthquake in September 2023. While strengthen, driven by a recovery of private con-
service sector growth is forecasted to remain strong, sumption and investment spending. After a down-
it is expected to experience a slight slowdown to turn in 2022 due to inflationary pressures household
3.7 percent as the tourism industry begins to align consumption recovered in 2023. It is expected to
with its long-term trend. grow by 4 percent in 2024, buoyed by subsiding in-

14 MOROCCO ECONOMIC UPDATE – UNLOCKING THE POTENTIAL OF THE PRIVATE SECTOR TO SPUR GROWTH AND JOB CREATION
flation, robust remittances, and the new cash trans- Risks
fer program introduced by the government. Despite
potential short-term fluctuations caused by rising bu- Morocco’s labor market could remain under sig-
tane gas prices amid the ongoing subsidy reform, in- nificant stress, particularly in rural areas. As high-
flation is projected to stabilize around 2 percent. Net lighted in the first chapter, these areas experienced a
Foreign Direct Investment (FDI) into Morocco has sig- notable decline in employment in 2023, despite an in-
nificantly surged (+110 percent year-on-year) from crease in agricultural value added during the same pe-
January to May, a dynamism that is likely to contin- riod. This situation could worsen in 2024, as agricultural
ue as previously announced projects start to materi- production is now decreasing. The recent rise in inactiv-
alize (see Box 2). This should contribute to a recovery ity and unemployment could partly be attributed to mis-
in private investment. With the acceleration of domes- reporting issues. This may stem from the health and so-
tic demand, net exports are expected to make a neg- cial protection reform currently underway, which might
ative contribution to growth. incentivize non-salaried workers to report themselves
The current account deficit, which nar- as inactive. A clear grasp of the incentives created by
rowed in 2023, is anticipated to widen in 2024. the reform for this category of workers is thus crucial to
It is projected to grow to 1.5 percent of GDP in 2024, avert unintended impacts on the labor market.
up from 0.6 percent in 2023, driven by a recovery in Innovative financing (sale and lease-back)
domestic demand and an increase in cereal imports. operations create a stream of future payment obli-
Despite this, the dynamic performance of manufac- gations from the State. The details of these transac-
turing and service exports, along with workers’ remit- tions are not publicly disclosed, but it is understood
tances, is expected to help keep the current account that they will result in higher current expenditures due
deficit below 3 percent of GDP in the medium term. to rental payments for the involved assets. These trans-
The deficit will likely be financed by long-term offi- actions represent non-recurring revenue sources, and
cial debt and foreign direct investment (FDI) inflows. when assessing structural budget balances, the notion
Foreign exchange reserves should stabilize at around that the post-pandemic fiscal deficit has improved
5.5 months of imports, thereby providing a substantial becomes more nuanced. Although this approach may
buffer against external shocks. be justified in light of the series of exogenous shocks
The budget deficit is projected to sta- experienced by the Moroccan economy in recent and
bilize at 4.4 percent of GDP, with an expected the need to sustain public investment, continuing to
return to pre-pandemic levels by 2026. The gov- closely monitor the use and impact of this instrument
ernment’s fiscal consolidation strategy is centered as well as to provide full transparency of its use will be
on the mobilization of tax and non-tax revenues important. According to the authorities, the upcoming
coupled with the containment of public spending, medium-term budget (published alongside the budget
including the progressive removal of butane gas law) will provide additional information on the budget-
subsidies to finance the new targeted cash transfer ary impact of innovative financing operations.
programs. Significant strides have been made since Certain elements of the ongoing reform of
the ongoing tax reform was launched in 2021, which the national health insurance system (AMO) gen-
has begun the gradual standardization of corporate erate fiscal risks that deserve careful consider-
tax rates, strengthened personal income taxation, ation. This is the case particularly for the scheme
and streamlined VAT rates.2 Additionally, the gov-
ernment plans to continue engaging in innovative 2
The reform reduces the number of VAT rates from the
financing operations to reduce the deficit. Overall, current four (7, 10, 14, and 20 percent) to two (10 and
20 percent) over 2024–2026. It also introduces a with-
this fiscal stance is anticipated to result in a steady
holding and self-declaration option that allows buyers of
reduction in the budget deficit that would allow the goods and services to collect and pay the VAT from non-
public debt ratio to gradually decline over time and compliant and non-registered suppliers, among other
remain below 70 percent of GDP. measures to improve collection.

Outlook and Risks 15

 TABLE 2 • Morocco selected economic indicators FY19–26

Estimated Projected
2019 2020 2021 2022 2023 2024 2025 2026
Real Economy (annual percent change, unless otherwise indicated)
Real GDP 2.9 –7.2 8.2 1.5 3.4 2.9 4.0 3.6
Agricultural GDP –5.0 –8.1 19.5 –11.3 1.4 –3.3 9.5 0.7
Non-Agricultural GDP 3.8 –7.1 6.9 3.2 3.6 3.7 3.6 4.0
Industry 4.1 –5.2 7.8 –2.7 1.3 3.0 3.2 3.3
Services 3.9 –7.9 5.7 6.8 4.4 3.7 3.5 4.2
Private Consumption 2.2 –5.6 6.8 0.0 3.7 4.0 4.2 3.7
Government Consumption 4.8 –0.6 7.2 3.0 4.1 4.6 4.1 3.6
Gross Fixed Capital formation 1.7 –10.0 7.5 –4.0 1.9 3.9 4.3 4.5
Exports, Goods and Services 5.1 –15.0 7.9 20.5 8.8 7.6 8.3 8.1
Imports, Goods and Services 2.1 –11.9 10.4 9.5 7.4 8.2 6.3 7.0
Unemployment rate (ILO definition, 9.2 11.9 12.3 11.8 13.0 — — —
in percent)
Inflation (average CPI, in percent) 0.2 0.7 1.4 6.6 6.1 1.5 2.7 2.4
Fiscal accounts (in percent of GDP)
Expenditures 27.4 34.1 31.3 34.1 33.0 33.1 30.8 29.5
Revenues, including all grants 23.8 27.0 25.8 28.7 28.6 28.6 27.0 26.3
Budget Balance –3.6 –7.1 –5.5 –5.4 –4.3 –4.4 –3.8 –3.3
Central Government Debt 60.3 72.2 69.4 71.5 69.5 70.0 68.6 67.2
Balance of payments (in percent of GDP, unless otherwise indicated)
Current Account balance –3.4 –1.2 –2.3 –3.6 –0.6 –1.5 –2.8 –2.5
Imports, Goods and Services 42.0 38.1 42.4 56.3 51.1 52.2 53.6 53.1
Exports, Goods and Services 34.2 30.8 33.2 44.8 42.8 44.4 44.8 45.4
Net Direct Investment 0.6 0.8 1.1 1.2 0.2 1.0 1.1 1.2
Gross official reserves (bln US$, eop) 26.4 36.0 35.6 32.3 36.3 38.6 39.5 40.4
In months of imports 6.9 7.1 5.3 5.4 5.5 5.3 5.4 5.6
Local currency per U.S. dollar 9.6 9.5 9.0 10.2 10.1 — — —
(period average)
Memo items
Nominal GDP (in billion dirhams) 1240 1152 1277 1331 1463 1529 1633 1732
Source: WB staff estimates and forecast; actual data from MEF, HCP and BAM.

that is being deployed for non-salaried workers formal employees. So far, a low share of non-salaried
(AMO-TNS), which has been designed to be finan- workers has enrolled, while those that are covered
cially balanced under the assumption that the vast have abnormally high claim rates, which is resulting
majority of such workers contribute to the system in a deficit that is still manageable, but which could
and that its benefits are close to those received by increase over time.

16 MOROCCO ECONOMIC UPDATE – UNLOCKING THE POTENTIAL OF THE PRIVATE SECTOR TO SPUR GROWTH AND JOB CREATION
 After five consecutive years of drought, tion plants. Erratic weather may continue to exac-
water scarcity is posing a growing threat to erbate the volatility of agricultural production (and
the Moroccan economy and society. Morocco thus overall GDP growth), causing hardship for rural
has seen rainfall below average since 2019, affect- populations. Continued low rainfall may compel the
ing dam replenishment and leading to overuse of government to enforce more water restrictions on irri-
groundwater. The government is countering the water gation and other sectors, potentially hampering eco-
shortage by constructing infrastructure like desalina- nomic growth.

Outlook and Risks 17

 3
PRIVATE SECTOR
DYNAMICS IN MOROCCO

A
s famously stated by Paul Krugman in 1994, from administrative sources. It anticipates some of the
“Productivity isn’t everything, but in the long- findings that will be included in a more comprehen-
term it is almost everything. A country’s abil- sive report on private sector dynamics and productiv-
ity to improve its standard of living over time depends ity, which is scheduled to be jointly published by the
almost entirely on its ability to raise its output per World Bank and OMTPME in the coming months.4
worker” (Krugman, 1994). This claim is substanti-
ated by a rich body of empirical contributions show-
ing that the bulk of cross-country differences in per
Aggregate productivity trends
capita income levels can be attributed to productivity
This section uses two indicators of aggregate
differentials, i.e., the amount of output that countries
productivity (Labor Productivity and Total Factor
produce with the same amount of inputs.3 Moreover,
Productivity) and compares Morocco with vari-
the literature suggests that the importance of produc-
ous benchmark countries. Labor productivity mea-
tivity as a determinant of economic growth increases
sures the output produced per unit of labor input
with countries’ income level, and becomes critical to
(value added per worker). It thus focuses specifically
overcome the so-called “middle-income trap”. This is
on the contribution of labor to production, as opposed
fully aligned with the diagnosis offered by the New
to Total Factor Productivity (TFP), which captures the
Development Model, which emphasizes the role that
overall efficiency of all inputs used in the produc-
productivity and private sector dynamism needs to
play for Morocco to transition towards a more robust
growth trajectory. The analysis presented in this spe- 3
See, for example Easterly and Levine (2001), Daude
cial focus chapter focuses on productivity trends in and Fernández-Arias (2010), Bulman, Eden and Nguyen
(2017).
Morocco both from a macroeconomic and a micro- 4
The key messages presented below are consistent with
economic perspective. It has been produced in col- the findings of a recent publication by HCP which also
laboration with the Moroccan Observatory for SMEs uses firm-level data to analyze the dynamics of the indus-
(OMTPME), exploiting a novel firm-level database built trial sector (HCP, 2024).

19
 FIGURE 26 • Labor productivity (2000=1) FIGURE 27 • Cumulative growth of labor
productivity (2000–2019)
1.6
180%
1.5 160%
140%
1.4 120%
100%
1.3
80%
60%
1.2
40%
1.1 20%
0%
1.0 –20%
–40%

Vietnam
Morocco
Algeria

Colombia

Tunisia

Albania

Indonesia

Egypt

India
0.9
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Non-agricultural sectors Total Services Industry Non-agri Aggregate

Source: WB staff calculations based on World Development Indicators. Source: WB staff calculations based on World Development Indicators.

tion process.5 We compare Morocco with structural Accelerating the structural transformation
peers in North Africa (Algeria, Tunisia and Egypt) and of the economy is key to increase labor produc-
with two categories of aspirational peers selected on tivity growth. Despite its slower growth over recent
the basis of the objectives of the New Development decades, value added per worker in the manufactur-
Model: (i) Albania, Bosnia and Herzegovina, and ing and services sectors remains close to three times
Colombia, upper middle income economies (UMICs) that in agriculture. Therefore, the reallocation of labor
that currently have a level of per capita income twice away from agriculture, a process known as structural
as high as Morocco (the flagship NDM target); (ii) India, transformation, strongly enhances productivity at the
Indonesia and Vietnam, high-growth economies that aggregate level. Between 2000 and 2019 the share of
have managed to double their per capita income lev- Moroccan workers in agriculture declined by 11.5 p.p.
els in the 21st century. while that in industry increased by 3 p.p. and that in
Although total labor productivity has services by 8.4 p.p. (Figure 28).7 This sectoral real-
increased significantly since the turn of the cen- location of workers increased labor productivity by
tury, that of non-agricultural sectors of the econ- 18.4 percent between 2000 and 2019, while within-
omy has lagged. Total value-added per worker sector productivity growth increased total productivity
increased by 55.7 percent between 2000 and 2019.6 by 37.3 percent during the same period. The contri-
A significant part of that increase was due to the evo-
lution of labor productivity in the agricultural sector,
which expanded by 152 percent. Instead, with a cumu-
5
TFP is calculated with reference to a production function
as a “Solow residual”, i.e., the part of output growth that
lative growth of 31.7 and 19.2 percent respectively
cannot be explained by increased utilization of inputs
during this period, labor productivity was much less (labor and capital).
dynamic in services and manufacturing (Figure 26). 6
This chapter focuses primarily on the pre-COVID period
In fact, among the benchmark countries considered given that the shocks that have erupted in recent years
in this exercise, Morocco’s non-agricultural labor pro- and the ensuing policy response led to wide macroeco-
ductivity growth compares favorably only to Algeria nomic fluctuations that render the identification of struc-
tural trends more difficult.
and Colombia (Figure 27). India’s non-agricultural 7
However, at 31.5 percent, the share of employment in the
labor productivity cumulative growth rate quadru- agricultural sector is still comparatively high in Morocco,
pled that of Morocco between 2000 and 2019, and only surpassed by India and Albania among considered
Indonesia’s was almost twice as high. peers.

20 MOROCCO ECONOMIC UPDATE – UNLOCKING THE POTENTIAL OF THE PRIVATE SECTOR TO SPUR GROWTH AND JOB CREATION
FIGURE 28 • Share of employment by sector FIGURE 29 • Contribution of sectoral
reallocation to labor productivity
50% growth (2000–2019)
45%
40% Vietnam
35% India
30% Indonesia
25% Morocco

20% Albania
Egypt
15%
Tunisia
10%
Colombia
5%
Algeria
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

–20%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%
Agriculture Industry Services Contribution sectoral reallocation No sector reallocation

Source: WB staff calculations based on World Development Indicators. Source: WB staff calculations based on World Development Indicators.

bution of structural transformation to total productiv- to growth in Morocco than in regional north-African
ity growth has been lower in Morocco than in all three peers and in most of the upper middle-income com-
high-growth aspirational peers (Figure 29). This sug- parators used in this exercise (Figure 31). However, it
gests that further deepening the structural transforma- was significantly lower than in the three high-growth
tion process would be needed for Morocco to yield the comparators: TFP contributed on average 3.5 p.p.
growth acceleration envisaged by the NDM. per year in India, 1.5 p.p. in Vietnam, and 1.1 p.p. in
Efficiency gains in the utilization of pro- Indonesia. Importantly, these countries not only man-
duction factors (TFP) has had a relatively mod- aged to double per capita income in the 21st Century,
est contribution to economic growth in Morocco. they also correspond to economies that sustained an
More than two thirds of the GDP expansion of the past investment effort comparable to that of Morocco as
two decades is explained by fixed capital accumula- a share of GDP. Another relevant question is there-
tion, reflecting a large and sustained investment effort fore why such a high level of capital formation trans-
led primarily by the public sector (Figure 30). TFP has lated into weaker productivity growth in Morocco
added on average 0.7 p.p. of economic growth per than in these countries. A possible explanation is that
year between 2000 and 2019, a fifth of the contribu- much of that investment effort has been shouldered
tion that capital accumulation had during this period. by the public rather than the private sector. But in that
Labor’s contribution to economic growth has been low case, the logical follow-up question is why the note-
and declining (just 0.2 p.p. per year on average in the worthy improvement in Moroccan infrastructures that
2010s). A critical question for Morocco is why, rather has resulted from public capital formation has not
than boosting economic growth, the ongoing demo- crowded in more private investment. Shedding light
graphic transition is resulting in a progressive decline on this important issue requires a more granular anal-
in the labor market participation rate, the key driver of
ysis of the constraints facing Morocco’s private sector.
economic exclusion for women and the youth.
The contribution of TFP to economic growth
has been lower in Morocco than in other coun- Microeconomic drivers of productivity
tries that have recently managed to double per in Morocco’s formal private sector
capita income in a length of time comparable to
that envisaged by the NDM. Efficiency gains in the Examining the dynamics of the private sector is
use of production factors had a higher contribution essential to develop a better understanding of

Private Sector Dynamics in Morocco 21

 FIGURE 30 • A
 verage contributions to GDP FIGURE 31 • Contribution of TFP to growth
growth (2000–2019)

6 4.0
3.5
5 3.0
2.5
4
2.0
1.5
3
1.0
2 0.5
0.0
1 –0.5
–1.0

Vietnam
Morocco

Algeria

Tunisia

Egypt

Albania
Bosnia and
Herzegovina
Colombia

India

Indonesia
0
2000–2009 2010–2019
Capital Stock Labor Total Factor Productivity

Source: WB staff calculations. Source: WB staff calculations.

aggregate productivity trends. This is the reason 0.3 percent of all companies respectively. More than
why micro-level data are being increasingly used 80 percent of firms employ less than 10 employees
both in advanced economies and a growing number even after 10 years of activity.
of EMDEs to design policies aimed at improving The density of formal firms has increased
the performance of the private sector. Among the considerably in Morocco, but this is partly due
most salient messages that have emerged from this to a proliferation of inactive firms. The num-
literature (including the upcoming World Development ber of Limited Liability Companies per thousand
Report of the World Bank) is that a dynamic business inhabitants (a measure of firm density) has regis-
environment where innovative firms can enter markets tered a fourfold increase since 2006. At 21.8, it com-
and grow to potentially challenge larger incumbents, pares favorably with all considered peers except for
is crucial to overcome the Middle-Income Trap. The Albania (Figure 32), although it remains well below
literature has also placed emphasis on the importance that of advanced economies (88 in Spain and 103 in
of the reallocation of resources from less to more Portugal). This increase in firm density is explained by
productive firms as a critical driver of aggregate a healthy number of new businesses opening each
productivity growth (Hsieh and Klenow, 2009). This year, but also by a surprisingly low de jure exit rate,
section exploits the OMTPME firm-level database to i.e. the share of firms that formally dissolve per year.
analyze the role that firms’ growth and reallocation However, Morocco’s private sector is characterized
have played in Morocco’s formal private sector. It by a proliferation of inactive firms, resulting in a high
focuses on the period 2016–2019 given that the de facto exit rate: in 2019 (last year before the pan-
pandemic and the extraordinary measures adopted demic), 7.9 percent of formal incorporated firms that
to address it render the interpretation of results for were operating in 2018 had stopped operating with-
2020–2022 more difficult. out formally closing their activity. In this context, the
The overwhelming majority of Moroccan positive trend in the evolution of firm density should
firms remain small. As of 2019, companies with rev- be interpreted with caution.
enue between 0 and 1 million dirhams (micro-enter- Moroccan firms struggle to grow, contrib-
prises) represented 84.4 percent of all companies in uting to explain the country’s formal jobs’ deficit.
Morocco, followed by 7.5 percent for companies with The estimations conducted with the OMTPME data
revenues between 1 and 3 million dirhams. Medium suggest that Moroccan firms surviving up to 15 years
and large enterprises account for 0.6 percent and are only 24.5 percent larger (in terms of workforce)

22 MOROCCO ECONOMIC UPDATE – UNLOCKING THE POTENTIAL OF THE PRIVATE SECTOR TO SPUR GROWTH AND JOB CREATION
FIGURE 32 • C
 omparative firm density (LLCs per FIGURE 33 • D
 ensity of high growth firms
1,000 inhabitants; 2019) (number of HGF per million
inhabitants)
120
700
100
600

80 500

400
60
300
40
200
20 100

0 0

Morocco

Colombia

Brazil

Turkey

Costa Rica

Italy

Spain

Croatia

Portugal
Egypt

India

Algeria

Colombia

Bosnia

Morocco

Albania

Spain

Portugal
Source: WB and OMTPME staff calculations based on Moroccan firm-level Source: WB and OMTPME staff calculations based on Moroccan firm-level
administrative data; WB Entrepreneurship Database; OECD. administrative data; WB Entrepreneurship Database; OECD.

than their average size at age 1. In Vietnam, that same ity increase by 5 percent over the same period. Part
cohort of firms is estimated to have increased their of this subdued productivity growth could reflect the
average size by 65 percent. In addition, the density of gradual expansion of the formal sector through the
High Growth Firms (HGFs) in the economy (defined progressive formalization of less productive busi-
as companies with at least 10 employees that man- nesses, which is a positive development. However,
age to increase their workforce by 10 percent or more it also reflects a deterioration in allocative efficiency.
over a period of three years) is comparatively very low Aggregate productivity growth can be decomposed
(Figure 33). This is in part due to the reduced number between: (i) a ‘within-firm’ component which captures
of firms that manage to reach 10 employees, evidenc- whether formal firms are making a more efficient use
ing the limited development that Moroccan micro- of production factors on average; (ii) a ‘between-firm’
enterprises manage to sustain over time. Moreover, component which captures whether labor is reallo-
Moroccan HGFs are found to be comparatively small cating towards more productive firms. The ‘within-
and to concentrate in low-skilled sectors such as con- firm’ measure of productivity growth obtained from
struction, with a limited footprint in higher value-added this decomposition was positive in the years that pre-
activities such as the Information and Communica- ceded the COVID-19 shock, suggesting that a gen-
tion Technology Sector. The weakness of this seg- eral upgrading of productive efficiency was taking
ment of the Moroccan corporate sector could thus place during this period. Instead, the ‘between-firm’
be an important factor to explain the insufficient num- measure of productivity growth was negative, imply-
ber of formal jobs created by the economy in recent ing that, other things equal, less productive firms
decades, and thus its incapacity to absorb a labor expanded faster (in terms of workforce size) than
force that is still growing at a considerable pace due more productive firms. In other words, the alloca-
to the ongoing demographic transition. tive efficiency of the Moroccan formal private sector
The recent productivity performance of tended to deteriorate prior to the pandemic, explain-
the formal private sector has stagnated due to ing the lackluster evolution of overall productivity.
worsening allocative efficiency. Between 2016 Moroccan markets appear not to be
and 2019 labor productivity in the corporate sec- rewarding most productive firms. The data show
tor grew by 2.2 percent, underperforming that of that large Moroccan firms—as measured by the
the rest of the economy, which saw labor productiv- size of their workforce—tend to be less productive

Private Sector Dynamics in Morocco 23

 FIGURE 34 • M
 isallocation is slowing productivity FIGURE 35 • …
 larger firms tend to be less
growth… productive
Drivers of aggregate labor productivity growth 10%
6%
4% 5%
Cumulative growth since 2016

2%

Percent difference relative

0%
0%

to [1,10] size class

–2% –5%
–4% –10%
–6%
–8% –15%
–10% –20%
–12%
–14% –25%
2016 2017 2018 2019 2020
–30%
[11,25] [26,50] [51,100] 500+
Within component (contribution)
Between component (contribution) Employment size class
Aggregate labor productivitity growth Labor productivity TFP (proxy)

Source: WB and OMTPME staff calculations based on Moroccan firm-level Source: WB and OMTPME staff calculations based on Moroccan firm-level
administrative data. administrative data.

than their smaller peers, while medium-sized firms investments, and hindering the “creative destruction
are most productive (Figure 35). These results sug- process” that occurs through the smooth exit of unvi-
gest that once Moroccan firms reach a certain size, able firms; (iii) informal competition and an unequal
productivity begins to lose relevance as a determi- access to key inputs such as finance, digital services,
nant of their future capacity to continue growing, or skilled workers may be disproportionately affect-
a feature of the formal private sector that probably ing smaller firms, limiting the expansion of potential
contributes to explain the misallocation problem high growth firms.
described above. Morocco is beginning to make substan-
tial progress in the fight against anticompetitive
practices. Following the operationalization of the
Policy implications Competition Council in 2018 and the amendment of
the Competition Law in mid-2023, an important land-
Overcoming the bottlenecks that explain the pro- mark investigation was concluded in November 2023
ductivity dynamics of the formal private sector is on nine fuel distributors and their industry associa-
critical to accelerate economic growth and job tion. As a result, these firms agreed on a voluntary
creation in Morocco. This would require a policy settlement amounting to MAD 1.84 billion for anti-
response designed to address the root causes that competitive pricing conduct, and on other commit-
are behind the allocative inefficiencies that char- ments to prevent future collusion. The Competition
acterize the formal private sector. Among the pol- Council has also reinforced its institutional capacity
icy domains that could explain these productivity and stepped-up other activities, including the review
trends, the following stand out in particular: (i) short- of more than 300 mergers, the issuance of opinions
comings in the competitive environment may be on draft regulations, or the preparation of studies on
allowing incumbents to rely on their market power the state of anti-competitive practices in key sectors of
rather than on efficiency gains to survive and grow; the economy. This signals the authorities’ resolve to
(ii) a related possibility is that the presence of reg- promote greater market competition. In addition, the
ulatory failures may be distorting firms’ capabilities State-Owned Enterprise reform that is currently being
and incentives, impeding their entry into markets and implemented with the creation of the National Agency
their capacity to sustain growth through efficiency for the Strategic Management of State Participations

24 MOROCCO ECONOMIC UPDATE – UNLOCKING THE POTENTIAL OF THE PRIVATE SECTOR TO SPUR GROWTH AND JOB CREATION
(Agence Nationale de Gestion Stratégique des The Moroccan private sector perceives that
Participations de l’État) is expected to reinforce the competition from the informal sector is a major
competitive neutrality of commercial SOEs in the mar- constraint to their operations, which may be dis-
kets in which they operate. This will require, among proportionately affecting smaller firms. The infor-
others, more stringent standards to limit the cross mal sector employs close to 77 percent of the labor
subsidization between their commercial and noncom- force and is estimated to account for almost a third of
mercial activities. GDP.9 According to the Enterprise Survey, 47 percent
However, more is needed to level the play- of Moroccan firms face informal competition, and more
ing field for all market players. Morocco’s public than 40 percent perceive that this type of competition
policies have successfully promoted and supported affects their operations. There is substantial empirical
FDI and large-scale investment projects over recent evidence on the impact that informal competition can
years, as evidenced in the statistics offered in Box 2. have on formal firms’ performance.10 Moreover, sev-
However, this special focus chapter suggests that less eral studies have found that smaller firms are more
success has been achieved with smaller firms, which likely to face informal competition, thus constraining
may have been put at a competitive disadvantage by their growth potential.11 This implies that combating
the emergence of large sectoral ‘champions’ (IFC, informality may be important also to increase pro-
2019). Leveling the playing field would require ensur- ductivity and thus economic growth. The Moroccan
ing that the business support mechanisms deployed authorities are currently engaged in various far-reach-
by the Moroccan State do not exacerbate the ing reforms expected to contribute to the formaliza-
observed diverging dynamics that characterize differ- tion of the economy, including the health and social
ent segments of the private sector, while creating the protection reform and the tax reform. An important by-
enabling conditions that are needed for potential high product of these reforms could be an acceleration of
growth firms to emerge and thrive. A thorough review productivity growth, especially if they manage to bring
of product market regulations and existing govern- in the sub-set of economic actors that opportunisti-
ment programs in support of SMEs would help iden- cally remain informal but would have the potential to
tify and correct specific constraints and disincentives survive in the formal sector. Instead, the formalization
facing these firms over their life cycle. of subsistence informal entrepreneurs is likely to have
The ongoing tax reform is correcting some less impact on productivity, given these firms’ low
of the distortions that may have disincentiv- growth potential and survival likelihood.
ized firms’ growth, and further analysis would be Lack of access to critical productive
needed to evaluate the impact of existing (and resources is another constraint that may be
future) tax incentives. In the 2010s Morocco reformed slowing the growth of Moroccan firms. Although
its Corporate Income Tax (CIT) system, introducing a Morocco has a relatively large financial system,12
marginal rate that increased with firms’ net profits. This access to credit is highly asymmetrical, with smaller
progressive CIT system may have created a disincen-
tive for smaller firms to grow, which is among the rea-
8
See, for instance, Benedeck et al. (2019).
sons why the ongoing tax reform aims at converging 9
See Elgin et al., 2021; Lahlou, Doghmi and Schneider,
towards a uniform 20 percent rate by 2026. In addition, 2020.
the Framework Law on the tax reform has set the objec- 10
Using firm-level survey data for a large cross-section of
tive of rationalizing tax incentives or expenditures. This countries, Amin, Ohnsorge and Okou (2019) find that
process should entail an evaluation of whether the pro- the average labor productivity of firms facing competi-
grams that have benefited Moroccan formal firms (gen- tion from the informal sector is 25 percent lower than for
firms that do not.
erating tax expenditures of about 1.3 percent of GDP 11
See Lamanna and Gonzalez (2017) and Amin (2021).
in 2022) create incentives that have contributed to the 12
Credit to the private sector amounted to 61.8 percent of
misallocation problem described above, as has been GDP in 2022, a share that was higher than in all peers
found to be the case in other economies.8 considered with the exception of Vietnam.

Private Sector Dynamics in Morocco 25

 and younger firms disproportionately credit con- lem. In addition, recent surveys show that despite the
strained.13 The data also shows that more productive pronounced improvement in the educational profile of
firms are not more likely to access credit than less Morocco’s youth, firms continue to perceive access
productive ones, implying that financial intermedia- to skills as a significant constraint for their opera-
tion may be contributing to the misallocation prob- tions. Addressing this skills mismatch is thus of criti-
lem described above. These trends suggest that the cal importance. Finally, a lack of access to affordable
various programs deployed by the Moroccan authori- digital services could be another constraint, particu-
ties to support SME’s, which have placed a particular larly for smaller firms.
emphasis on access to external sources of financ-
ing through credit guarantees and direct loans, may
require an evaluation and potentially a fine-tuning.
Accelerating the operationalization of recent reforms 13
Between 2016 and 2019, only 16 percent of firms with
such as the deployment of a national movable collat- less than 4 employees and 50 percent of firms with
eral registry or the extension of the data used by credit between 4 and 10 employees had an active credit con-
tract with a financial institution, compared to 70 percent
bureaus may also be needed to address the informa-
of firms with at least 50 employees. The rate of use of
tion asymmetry problems that are likely to explain financial credit also increases with age, with 59 percent
banks’ reluctance to lend to smaller and younger of firms older than 10 years having an active credit pro-
firms, thus addressing the credit misallocation prob- gram, against 31 percent of firms aged 2 to 5 years old.

26 MOROCCO ECONOMIC UPDATE – UNLOCKING THE POTENTIAL OF THE PRIVATE SECTOR TO SPUR GROWTH AND JOB CREATION
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Markets In Morocco. A second Generation of Lahlou, Kamal, Doghmi, Hicham and Schneider,
Reforms: Boosting Private Sector Growth, Job Friedrich, 2020. “The Size and Development
Creation and Skills Upgrading. World Bank of the Shadow Economy in Morocco,”
Publications – Reports 32402, The World Bank Document de travail 2020–3, Bank Al-Maghrib,
Group. Département de la Recherche.
Krugman, Paul. 1994. The Age of Diminished Lopez-Acevedo & R. Robertson (Eds). 2023. Exports
Expectations: U.S. Economic Policy in the to Improve Labor Markets in the Middle East
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28 MOROCCO ECONOMIC UPDATE – UNLOCKING THE POTENTIAL OF THE PRIVATE SECTOR TO SPUR GROWTH AND JOB CREATION
SELECTED RECENT
WORLD BANK
PUBLICATIONS ON
MOROCCO
Strengthening Institutional Trust in Morocco Through Public Policy November 2023 Maghreb Technical Note/Number 9
Morocco Country Climate and Development Report October 2022 CCDR

Trends and Determinants of Female Labor Force Participation in Morocco: An Initial Exploratory Analysis March 2021 Policy Research Working Paper
Female Labor Force Participation in Morocco: Constraints and Policy Actions November 2023 World Bank Report
Tracking Economic Activity in Response to the COVID-19 Crisis Using Nighttime Lights — The Case of February 2021 Policy Research Working Paper
Morocco
Morocco’s Jobs Landscape March 2021 Publication
Once NEET, Always NEET? A Synthetic Panel Approach to Analyze the Moroccan Labor Market May 2020 Policy Research Working Paper
Morocco Economic Update – Spring 2020 April 2020 Brief
Water Scarcity in Morocco: Analysis of Key Water Challenges Jan. 2020 Report
Morocco - Supporting the Design of Performance-Based Contracts to Improve Results in Education Dec. 2019 Brief
Polarization and Its Discontents: Morocco before and after the Arab Spring Oct. 2019 Policy Research Working Paper
Doing Business 2020: Comparing Business Regulation in 190 Economies – Economy Profile of Morocco Oct. 2019 Doing Business

Morocco Economic Update – Fall 2019 Oct. 2019 Brief

The Moroccan New Keynesian Phillips Curve: A Structural Econometric Analysis Sept. 2019 Policy Research Working Paper
Lessons from Power Sector Reforms: The Case of Morocco August 2019 Policy Research Working Paper
Leveraging Urbanization to Promote a New Growth Model While Reducing Territorial Disparities in June 2019 Publication
Morocco: Urban and Regional Development Policy Note
Morocco: Systematic Country Diagnostic (‫ةيبرعلا‬, English, French) June 2019 SCD

Creating Markets in Morocco a Second Generation of Reforms: Boosting Private Sector Growth, Job June 2019 CPSD
Creation and Skills Upgrading
Morocco’s Growth and Employment Prospects: Public Policies to Avoid the Middle-Income Trap March 2019 Policy Research Working Paper

29
SUMMARY OF SPECIAL
FOCUSES FROM THE
LATEST MOROCCO
ECONOMIC UPDATES

Fall 2023 MEU: “From resilience to Fall 2022 MEU: “Responding to

shared prosperity “ Supply Shocks”

The Special Focus of the “Fall 2023” MEU analyzes The Special Focus of the “Fall 2022” MEU analyzes
the roots of Morocco’s high rates of female inactivity the impact of the inflationary surge across the
from a comparative perspective. Morocco’s low and income distribution. It shows that inflation is
declining FLFP constitutes a major missed opportu- substantially higher for poorer households due to the
nity and constraint to boosting potential output and larger weight of food in their consumption basket.
growth. World Bank simulations show that meeting Existing price subsidies have somewhat softened
the New Development Model objectives of a 45 per- the impact of inflation on poverty and vulnerability.
cent FLFP rate could increase growth by almost 1 per- However, a disproportionate share of the public
centage point per year, may reduce inequality by resources needed to sustain Morocco’s untargeted
between 1 and 2 Gini points. In addition, increasing price subsidy schemes end up flowing to wealthier
women’s economic agency will have wider knock-on households, which in absolute terms consume more
effects such as increased investment in human capi- of the subsidized goods. In the future, a well targeted
tal for today’s children. cash transfer program would constitute a more
effective and efficient tool to mitigate the impact of
the shock on poor and vulnerable households. This
analysis also underlined the importance of computing
high-frequency price indicators at the local level to
improve the measurement and monitoring of poverty
and vulnerability.

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