Morocco’s economy resilient, private sector faces obstacles

Despite various headwinds, including a slowdown in the global economy, an inflationary shock and the Haouz earthquake, Morocco’s economy has shown resilience and has picked up speed, with real output set to grow by 3.4 percent in 2023, according to the World Bank’s latest economic report.

Growth was driven by a rebound in tourism, strong performance in export-oriented manufacturing sectors such as automotive and aviation, and a resurgence in private consumption. Supportive macroeconomic policies, including public sector expansion and fiscal consolidation strategies, contributed to this acceleration in economic activity. Morocco also saw a significant increase in foreign direct investment, which offers significant growth opportunities, and a decline in the current account deficit to its lowest level since 2007.

However, the Moroccan economy faces challenges as businesses and households struggle to recover from recent shocks, as evidenced by a rise in business insolvencies and a labor market that lost 200,000 rural jobs in 2023 despite an economic recovery. Per capita consumption has barely returned to pre-pandemic levels, and a new social assistance program is set to help the most vulnerable households. Looking ahead to 2024, economic growth is forecast to slow to 2.9 percent due to a weak agricultural campaign, but nonfarm GDP is expected to remain resilient.

“This report highlights the key role of productivity in raising the country’s economic growth and living standards, in line with the New Development Model (NDM) and Morocco’s long-term vision for inclusive development,” said Ahmadou Moustapha Ndiaye, World Bank Country Director for the Maghreb and Malta. “The country has made significant progress recently, including the launch of the Competition Council, changes to the competition law, and a landmark antitrust settlement with fuel distributors. To build on this progress, as highlighted in the NDM, further efforts will be needed, in particular to support small and medium-sized enterprises.”

The report includes a chapter on the dynamics of the private sector in Morocco, highlighting its productivity performance and the need to address constraints in order to improve job creation. The report is based on an analysis conducted in partnership with the Moroccan Observatory of Small and Medium-sized Enterprises, which uses a comprehensive database of formal firms.

The report, entitled “Unlocking the potential of the private sector to spur growth and job creation,” highlights the importance of micro-level data in understanding productivity trends and shaping policies for private sector performance in Morocco. It highlights the need for a dynamic business environment that encourages innovation and the reallocation of resources towards more productive firms in order to increase productivity growth. It also points out that the predominance of small and micro-enterprises in Morocco, which struggle to grow, contributes to the insufficient number of jobs created in the country for its growing workforce. The report outlines the challenges and policy measures required to increase productivity and growth in the formal private sector.