OECD Economic Outlook, Volume 2025 Issue 1: Morocco
Table of contents
The Moroccan economy is expected to remain solid in 2025 and 2026, as weather conditions alleviate the drought that severely affected the agricultural sector in 2023 and 2024. Real GDP is projected to grow at 3.8% in both 2025 and 2026, driven by resilient domestic demand and the performance of the tourism and industrial sectors. While direct trade linkages with the United States are limited, heightened uncertainty stemming from the deterioration of global trade conditions may negatively affect export and investment growth prospects.
Headline inflation is projected to stabilise at around 2% in 2026, after a slight uptick in 2025. Despite higher spending, tax and subsidy reform has helped to maintain the deficit at a steady level, but further reducing the fiscal deficit would improve fiscal space. Unemployment is projected to fall below 13% in 2026. However, increasing formal labour participation, especially of women, and reducing unemployment of young people remain key challenges, alongside achieving further improvements in skills. Efforts to manage climate risks and water scarcity should be stepped up.
Morocco has experienced solid export-driven growth in recent years, despite a prolonged drought that held back agricultural production and household incomes. Weather conditions have now improved. The tourism sector has continued to grow strongly, with a record number of 4 million visitors in the first quarter of 2025. Foreign direct investment has been strong and new production is coming onstream, supporting output in sectors such as aeronautics, textile and food. After the easing in 2024, headline annual inflation increased to 2.6% in February, mainly because of the uptick in food prices, before falling to 0.7% in April, averaging 1.7% in the first 4 months of 2025. Core inflation has slowed to around 1% in April and has averaged 1.8% since the beginning of the year.
Twelve month moving average.
Source: CEIC.
Exports slightly decreased in the first quarter of 2025, mainly due to a reduction in the automotive sector, and imports increased, pushed up by food products and capital goods. The current account deficit is financed predominantly by foreign direct investment inflows. Morocco’s merchandise exports to the United States are now subject to a tariff of 10%, but direct trade exposure to the United States is limited. However, Morocco is heavily exposed to developments in European markets, and the integration into the European automotive supply chains might pose risks.
With inflation having eased, the central bank continued its easing cycle with a further 25-basis point rate cut in March 2025, bringing the policy rate to 2.25% from the peak of 3% in March 2023. Recent tax and subsidy reform has broadened the tax base and raised revenues, narrowing the budget deficit, which is projected to fall below 4% in 2025 and 2026. However, fiscal policy remains slightly supportive, mainly due to new public investment expenditure.
Economic activity is expected to grow at 3.8% in both 2025 and 2026. As weather conditions improve, agricultural production is expected to expand. Thanks partly to investment supporting measures like the investment charter, both domestic investment and FDI are projected to remain robust, further fostering the expansion of the manufacturing, tourism and construction sectors. The car industry will expand, and the tourism sector is expected to set new records in terms of tourist arrivals. However, heightened uncertainty and less favourable global trade conditions could lower Morocco’s growth through a reduced inflow of foreign trade investment and weaker international demand.
The central bank will need to remain vigilant and maintain a data-dependent approach to ensure that inflation pressures are durably contained, especially in view of the heightened uncertainty and trade policy tensions that might increase the prices of many tradeable goods. Investment, both domestic and international, has been strong, but progressing with the reform of state-owned enterprises and further strengthening the anti-corruption framework would boost private sector investment. Fully harnessing favourable demographics is essential to increase growth performance. While the economy has been growing, unemployment remains high, especially among youths. Increasing the flexibility of labour market contracts, strengthening activation measures and the role of the employment agency would help to reduce informality and raise formal employment. Tackling gender stereotypes and providing affordable childcare would help to strengthen female participation in the labour market. Enhancing educational attainment and skills by reducing school leave at early age and improving teaching will help make the most of the increasing workforce and raise labour productivity, which has a wide gap with the global efficiency frontier.