| Recent macroeconomic and financial developments: After a weak economic performance in 2022, with a growth of just 1.3%, growth rebounded in 2023 to 3.02%, due to the revival of agricultural activities and services and the moderate recovery in domestic demand. Inflation fell to 6.1% in 2023, after peaking at 6.6% in 2022, as imported inflationary pressures eased. The budget deficit improved from 5.2% of GDP in 2022 to 4.7% in 2023, due to the combined effect of strong budget revenue and lower subsidies. The 2023 financing requirement was covered mainly by issuing Eurobonds, after a period when government securities were used. Public debt was estimated at 69.7% of GDP in 2023, compared with 71.5% in 2022. The current account deficit decreased by 2 percentage points, from 3.5% in 2022 to 1.4% in 2023, due to a smaller trade deficit, record tourism receipts, and higher remittances. Foreign exchange reserves covered 5.1 months of imports in 2023, down from 5.5 months in 2022. The financial system is sound, with an average bank solvency ratio of 15.8% at the end of June 2023, compared with 15.6% in 2022, and nonperforming loans stabilized at 8% of gross loans. Morocco, an upper-middle-income country, had an income per capita of $9,410 in purchasing power parity terms in 2022. Progress must be consolidated through more inclusive growth to reduce the poverty rate, which rose from 3% in 2021 to 4.9% in 2022, and mitigate the rise in the unemployment rate, which rose from 11.8% in 2022 to 13% in 2023, affecting especially young people (35.8%), college graduates (19.7%), and women (18.3%). |
| Outlook and risks: GDP growth is projected to rise moderately to 3.5% in 2024 and strengthen to 3.8% in 2025, boosted by higher investment. Inflation is projected to fall slightly to 4.1% in 2024 and 3.8% in 2025, as world food prices decline. The budget deficit could fall gradually to 4.4% of GDP in 2024 and 4.2% in 2025, benefiting from economic recovery and lower subsidies on butane gas prices. The current account is projected to record a small deficit of 0.4% of GDP in 2024, worsening moderately to 0.9% of GDP in 2025, as a result of higher imports. Growth prospects could be reduced by poor rainfall or slower economic growth in the European Union, which could worsen terms of trade. Rising tensions related to Russia’s invasion of Ukraine could trigger another shock in food prices. Risk mitigation factors include implementing structural mechanisms to manage climate shocks and natural disasters and the Royal Social Protection Initiative. |
| Reform of the global financial architecture: Structural transformation has been slow and has benefited the services sector, with the workforce shifting from agriculture to services and industries. From 2011 to 2022, the services sector accounted for 52% of GDP and employed 42.3% of the working population. Over the same period, the industrial sector accounted for approximately 25% of GDP, and the manufacturing sector for 14.7%. Manufacturing’s share of employment fell from 12.2% in 2000 to 11% in 2019. Agriculture accounted for approximately 35% of employment in 2011–2022. The country has prepared a new development model to strengthen its structural transformation by making it more inclusive. The model promotes manufacturing, trade integration, infrastructure connectivity, and human capital development. To implement this model while taking advantage of the global financial architecture, Morocco must maintain access to high volumes of lower-cost external financing with long maturities. The country can take advantage of increased Special Drawing Rights at the International Monetary Fund, partial guarantees of credit risk from multilateral development banks, and climate funds to mitigate water stress. It must implement reforms to position itself in global value chains, mobilize more domestic resources by developing the private sector, rationalize tax spending, and make public procurement more open to micro, small, and medium enterprises. |