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Morocco

Enhanced economic outlook, benefiting from a fragmented trade system

Last update – November 2024

Country rating 


LOW RISK FOR ENTERPRISE
Economic risk

Slight risk of payments disruption
Business environment risk
Moderate risk of payments disruption
Political risk

Slight risk of payments disruption
Commercial risk
Low risk of payments disruption
Financing risk
Low risk of payments disruption
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Form of state
 Constitutional Monarchy
Head of government
 Aziz Akhannouch (Prime Minister)
Next elections
 2026, legislative

Strengths & weaknesses

  • Increasingly diversified economy and a growing manufacturing hub to the EU; already a top car supplier to Europe
  • Foreign policy aligned with that of the upcoming Trump administration
  • Prospects of additional production of phosphates and fossil fuels
  • Climate shocks remain the highest risk to Moroccan economy and social stability
  • Youth unemployment remains high (above 20%)
  • Diplomatic tensions with the EU will remain top of the agenda

Economic overview

A robust economic outlook threatened by climate shocks

Morocco’s GDP growth is projected at +3.1% y/y in 2024 and +3.5% in 2025. The economy is currently experiencing an expanding cycle, helped by several simultaneous factors. Industrial production growth has seen strong quarters and is projected to continue with increased foreign investment in manufacturing, energy and mining. Agricultural output, which suffered in recent years due to a prolonged drought, is expected to see some relief, given the autumn 2024 rains. Tourism arrivals are expected to beat last year's historic record, while consumer and government spending continue to show signs of strength, with consumer sentiment growing, and government revenue on the rise. Inflation saw a drop in early 2024, which should bring annual inflation to 1.7%. Inflation in 2025 and 2026 is projected to be above 2%.

However, there are still many challenges to the Moroccan economy and business community. Climate is a top concern. The rains in the autumn 2024 season provided some relief after the driest year in 80 years was recorded in 2023. However, in later 2024, torrential rains killed more than 20 people in Southern Morocco and flooded parts of the desert, filling up Lake Iriqui, which had been dry for more than 50 years. Morocco is being affected by weather patterns traditionally seen in Mali or Mauritania, much to the south.

The Moroccan economy continues to maintain low levels of debt, forecasted at 26.9% of GDP in 2024, followed by an increase to above 27% in 2025. However, deficit is projected to continue growing 4.2% of GDP in 2024 and 4.9% in 2025. Finally, the social context remains tense as official unemployment remains above 30%.

Public finances require monitoring while exporting capacity is on the rise

Government spending has been picking up in recent years through both increased revenues and increased debt issuance. Debt service remained just below the African average at 5.5% of GPP in 2024, but it is expected to rise to 6.9% in just two years. The government has expressed interest in issuing a Eurobond valued in USD1bn in 2025. While debt levels still provide the finance ministry some leeway to continue borrowing, some state-owned enterprises are highly indebted, which represents a potential fiscal risk for the government. Morocco’s water and energy utility company accumulates the equivalent of 8% of total public-sector debt. Morocco’s government is in the midst of reforming some of the troubled SOEs by opening them to private sector ownership (which is expected to raise almost USD1bn in 2024) and with lending from the World Bank.

The Moroccan Central Bank governor pointed towards a full flexibilization of the Moroccan dirham, currently pegged in a EUR-USD basket with a fluctuation band of ±5%. However, according to the central bank governor, successful inflation targeting should be achieved before a full flexible exchange. In 2024, the dirham appreciated by 2%+, among the best performing currencies in Africa. International reserves are currently at a record high, given increased foreign direct investment, tourism income and robust remittances that persist at record levels.

The economic growth of the Moroccan economy over the last decade has been driven by an overall increase of all major economic sectors, notably services, government and manufacturing, and to a lesser extent agriculture and construction. Yet, the extraction sector has experienced a sharp decline since the Covid-19 pandemic, driven by global price fluctuations. The value of Morocco’s main export, phosphates, decreased by -25% from the 2021 peak to 2023, but has already showed signs of growth in 2024. In the mid-term, phosphates as well as other extracting activities are expected to grow, given the increase in volume capacity, as well as the large number of natural resources available in the Western Sahara region. Automobiles follow phosphates as the top Moroccan export. The North African economy is currently among the top car exporters to the EU, exporting above 500k cars in 2023, similar to China, Japan and South Korea. Morocco's successful car industry follows years of investment by European carmakers like Renault and Stellantis, aiming to boost competitiveness within their costs and mitigate the risks associated with offshoring.

Morocco’s enhanced international role amid its Western Sahara recognition and a fragile social cohesion

Morocco is actively pursuing a decades-long development plan to elevate its income level from low-middle income to higher-middle income. While the plan does not have the same capital resources as those of the Gulf nations, it focuses on diversification, investment attraction and renewable energy as key priorities. A significant portion of spending is allocated to large-scale projects. In the 2025 budget, Morocco will prioritize the construction of sports venues for the Africa Cup of Nations in 2025 and the World Cup 2030, which it will host alongside Spain and Portugal. Additionally, defense spending is set to increase under the planned budget for 2025.

The budget also includes funds for the development of the Atlantic pipeline, intended to connect Nigeria's gas fields to Morocco through 13 other countries, although this expensive infrastructure project still requires international financing for completion. Morocco aims to enhance its role as an energy hub. On the renewable energy side, the government has focused on attracting solar and green hydrogen investments, in line with the EU's energy transition goals. The country has also awarded several contracts to global oil firms for offshore and onshore exploration, although significant discoveries have yet to be made. France's recent announcement recognizing the autonomy of the Western Sahara under Moroccan authority, a position in line with that of Spain and the US, will open the door to French businesses and investments, given the rich natural resources from fish to phosphates in the region. However, recent European Court of Justice decisions have impacted fishing and farming agreements between the EU and Morocco, affecting EU fishermen and Moroccan businesses in the region.

Social dynamics in Morocco have become increasingly active, with increasing demonstrations, reflecting public sentiment on various issues. The government continues to allow some peaceful protests while focusing on strengthening key international relationships, particularly in the defense and technology sectors. In parallel, youth unemployment remains elevated at above 20%, a broader trend across the Mediterranean region. Although the government is pursuing initiatives to address it, high youth unemployment levels continue to pose a challenge for the economic and social context of the country.

Trade structure by destination/origin

(% of total, 2023)

Trade structure by product

(% of total, 2023)

Contact 

Contact Allianz Trade
Economic Research Team
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Lluis Dalmau
Allianz Trade
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