The growth of the Moroccan economy is expected to decline slightly in 2024, around 3% compared to 3.3% in 2023. But beyond the economic situation, more structural issues are emerging in the medium term: that of exposure to a climate risk which is occurring, that of a broken down development model which has led to a slowdown in growth (of 4.3% on average over 2004-2014 at 2.4% over 2015-2023), and that of high unemployment which accelerates the temporality of reforms. These are all issues that are at the heart of the large-scale reform plan launched by the government in its New Development Model (NMD). So what do growth indicators tell us about the development trajectory? In the short term, growth will be supported by an improvement in the national economy. First, inflation has fallen sharply. It reached a peak of 10% in February 2023, fueled by the increase in energy prices from March 2022 and aggravated by an episode of severe drought which caused agricultural production to collapse by 12% in 2022. A normalization of these conditions since 2023 has led to a sharp decline in inflation. It is expected to be around 2.5% in 2024 compared to 6.1% in 2023 (6.6% in 2022), which will support private consumption. Then, this drop in inflation allowed the central bank to end the cycle of monetary tightening in June, lowering rates from 3% to 2.75% (the first cut since 2022). The evolution of external demand is more uncertain, particularly that of Europe, Morocco’s main trading partner. However, the tourism and phosphate sectors remain dynamic. Furthermore, the automobile and electronic components sectors are supported by the momentum of Moroccan industrial diversification, which seems to be evidenced by the growth in exports of these sectors in recent years. Growth, however, remains constrained by a new agricultural recession (-5% in the first half). This factor is worrying, because it is no longer an exogenous shock for the Moroccan economy. The 2019-2022 period was the driest recorded since the 1960s, and the lack of rain is becoming chronic. However, the primary sector contributes to 12% of Moroccan GDP. Recent agricultural recessions therefore have a strong impact on growth, the volatility of which is increasing. The stakes are even greater for employment, because the sector absorbs around 38% of the workforce, and even 50% of the female workforce, whose participation is already very low (<25%). The social impact is therefore major. In 2023, following the drought episode of 2022, unemployment reached 13%, a level not seen since the 1990s. The government has initiated reforms to support the sector – notably the development of hydro-agricultural infrastructure and water saving measures. Still, the agricultural sector will remain a factor of volatility for growth in the years to come. Given the impact on employment, this dimension accelerates the need for transformation of the Moroccan economy, to reduce constraints on growth and promote job creation in other sectors. This is the whole challenge of the New development model1 launched in 2021. Initially, a consultation exercise made it possible to make the diagnosis. It identifies the “main nodes at the origin of the loss of momentum in development”. In particular, there are private sector indicators which show a weakness in the entry and exit of businesses in the Moroccan economy. This results, according to the survey, from heavy regulations, often applied in a heterogeneous manner. The rules of j Most of the business community finds itself muddled and complicated, which weighs on entrepreneurial dynamics and very often encourages informality. Another major observation is that a non-optimized system of economic incentives favors certain traditional sectors (typically construction), which discourages investment in sectors that bring diversification and productivity. Finally, sometimes insufficient regulation authorizes anti-competitive practices, which reinforce oligopolistic positions. Ultimately, all these elements lead to an economy of rents, causing a certain inertia in the economic structure. Faced with these observations, reforms are accelerating. In particular, the investment charter, adopted in 2022, aims to encourage 550 billion dirhams of investments by 2026 (51 billion euros, or 30% of GDP), to create 500,000 jobs (4.7% of current employment). The authorities aim more broadly to increase private investment to 2/3 of total investment, compared to 1/3 currently. This charter constitutes a complete overhaul of the incentive system, for the benefit of diversification. This will be supported by reforms to the business climate, to strengthen regulation and prevent anti-competitive practices. Finally, education and inclusion appear at the center of the reforms. The education offering in Morocco has been expanded and generalized, but this has sometimes been done to the detriment of quality, which remains below international standards, according to Moody's assessment in its latest report. There is also a problem of aligning university courses with the job market. The World Bank notes in this regard that a university diploma increases the chances of unemployment fivefold2. The education system is therefore a central axis of the reform program. Furthermore, Morocco has embarked on an overhaul of the social protection system, proposing universal protection, which is a key step to improving the resilience of vulnerable populations and an incentive for the formalization of the economy. Our opinion - Morocco has demonstrated recognized efficiency in the management of its public policies, allowing it to ensure a certain macroeconomic stability resistant to shocks (Covid, war in Ukraine, earthquake, etc.). It is an important guarantee of confidence for investors, which has notably enabled an uninterrupted history of access to international markets, and a low cost of debt, elements which establish its sustainability. But this attachment to stability, marked by anchoring policies over the long term, has perhaps reached a limit: that of an economy marked by a form of inertia, faced with the challenges of the climate emergency and employment, which endanger the stability of the Moroccan trajectory. That said, the diagnosis of macroeconomic and social constraints and issues seems well established and Morocco has embarked on a major reform program. The start of development in certain sectors, such as automobile or electronic components, are perhaps the first signs of an economy getting back into motion, even if the effects of this plan on growth and employment can only be fully measured in the medium term.
