OECD Economic Outlook, Volume 2024 Issue 2: Morocco
Table of contents
Real GDP growth is projected to strengthen to 4.1% in 2025 and 3.8% in 2026. Despite the on-going drought, private consumption growth should pick-up, supported by higher real incomes. The new Investment Charter and surging FDI inflows will support investment, industrial production, and export growth. Tourism will continue to grow strongly. Inflation has slowed considerably in 2024 reflecting declines in energy prices, though a mild upturn in headline inflation is expected after April 2025 given the ongoing partial withdrawal of butane gas subsidies. A prolonged period of drought could continue to weigh on agricultural output, rural employment, and household incomes.
Monetary policy easing should continue, while carefully monitoring price developments during the subsidy reduction process. The government should implement its fiscal plans to 2027, which imply a modest tightening, and reinforce the fiscal rule and budgetary framework. A package of measures to reduce informality, remove obstacles to female participation and to improve education and training would help to create more and better-quality jobs, building on existing efforts to boost social protection, labour market programmes and education reforms.
Morocco’s economy grew at a steady rate in the first half of 2024, driven by consumption and investment. The tourism sector has experienced strong growth as Morocco welcomed a record 14.6 million tourists in the year to date. Industrial production has remained resilient, driven by strong foreign demand of key industrial sectors including the automotive, aeronautics, and phosphate sectors. As a result of exceptional drought conditions in 2024, the agriculture sector remained weak with sectoral value-added contracting by more than 4% in the first half of 2024, contributing to elevated rates of unemployment with sharp declines in rural, mostly unpaid jobs. Inflation has slowed considerably and has been below 2% since February 2024 as a result of declining energy prices.
Source: CEIC.
Export value growth has been robust at 5.5% during the first nine months of the year, in line with strong industrial production volumes and tourism. Elevated demand for foreign equipment and other capital goods has supported import growth, while lower energy import costs have allowed the current account deficit to narrow. Net FDI inflows surged by 50.7% from January to September, from a year earlier, benefitting from the rollout of new investment incentives and the emergence of an electric vehicle battery manufacturing ecosystem in the country.
After raising policy rates to a high of 3% in March 2023, the central bank began its easing cycle with a 25-basis point rate cut in June 2024. Further rate cuts are projected and the policy rate is expected to converge towards the neutral rate as the central bank closely monitors price developments from the gradual phase-in of butane gas price increases. Morocco is currently undertaking a major expansion of social assistance programmes funded by the reduction of subsidies, corporate tax revisions and improvements in tax collection. The 2025-2027 three-year budget programme foresees a gradual pace of fiscal consolidation with the deficit narrowing from 4% in 2024 to 3% in 2026 and 2027.
Morocco’s economy is expected to expand by 4.1% in 2025 and 3.8% in 2026. Household consumption growth will be resilient, driven by rising incomes, an expansion of social assistance programmes, and a recovery in agricultural production. Investments to improve the country’s tourism and water infrastructure and new investment incentives will support public and private capital formation. Continued expansion of tourism facilities and automotive production in the country will sustain export growth. A modest upturn of headline inflation is expected after April 2025 in line with the next phase of the subsidy reduction process. Main risks include lower-than-expected growth in the euro area, renewed increases in global energy and food prices and a prolongation of drought conditions.
Monetary policy should continue to be set using a data-dependent approach, easing policy while carefully monitoring price developments during the subsidy reduction process. The government should implement its fiscal plans to 2027 and the planned mild consolidation, meeting any additional commitments within existing plans. A strengthening of the fiscal rule with a focus on medium-term debt sustainability would help. Subjecting new government spending and investment incentives to cost-benefit analysis, while implementing new SOE reform measures, would improve productivity. Morocco has a young population, but continues to experience emigration, widespread labour market informality, low participation of women and rising unemployment, particularly as a large number of young people enter the labour market each year. A comprehensive package of measures is needed to reduce informality, including better incentives and enforcement. Continuing to reduce discrimination and tackling gender stereotypes, while expanding the availability of free childcare, will strengthen the labour market integration of women. Upgrading the skills of Morocco’s population, especially tailored towards the needs of priority and emerging sectors, would boost workforce participation and address skill-mismatches. Price revisions and further adaptation measures will be needed to accommodate growing water scarcity and climate risk.