Morocco's economy set to grow 3.5% in medium term, IMF says

Tourists in Marrakesh. Morocco has called on investors to inject capital into its tourism sector. AFP

Morocco’s economy strengthened last year on recovery in domestic demand and exports, with growth expected to pick up to about 3.5 per cent over the medium term, boosted by stronger investment, the International Monetary Fund has said.

The fund projected that Morocco’s economy grew by 3.1 per cent in 2023, from 0.8 per cent the previous year.

Stronger domestic demand should gradually “widen the current account deficit towards 3 per cent” of gross domestic product, while inflation is projected to “continue to fall slowly as pressures on commodity and food prices fade”, the IMF said on Wednesday, following a staff visit.

The IMF last year approved a $1.3 billion package for Morocco, after a 6.8-magnitude earthquake on September 8 – the country’s deadliest in more than 60 years – killed about 3,000 people in the North African country.

The 18-month arrangement will “help Morocco address climate vulnerabilities, bolster its resilience against climate change, and seize the opportunities from decarbonisation”, the Washington-based lender said at the time.

Morocco has since called on investors to inject capital into its tourism sector, with opportunities ranging from developing beach resorts to building theme parks.

The country is seeking to double the investment in its tourism industry to $2 billion a year by 2026, Imad Barrakad, chief executive of the Moroccan Agency for Tourism Development, said in September.

The IMF had also approved a $5 billion flexible credit line for Morocco in April to boost the country’s external buffers, provide insurance against possible risks and prevent crises.

Morocco must focus on accelerating structural reforms to boost inclusive growth, the IMF said on Wednesday.

“Reforming the unemployment insurance scheme and improving active labour market policies could help boost job creation in the short run,” the fund said.

The country also needs to improve the participation of women in the workforce, which is “at historical lows”.

Health care and education reforms promise to improve access and quality of services and enhance capital accumulation in the long run, it added.

The social protection and health sector reform programme, which started in 2020, aims to extend health care coverage to all Moroccans and improve the efficiency and targeting of the country’s social safety nets, according to a working paper by the IMF last year.

The government’s reform agenda includes other areas, such as taxation and pension systems, the liberalisation of the electricity market and a new strategy to address water scarcity.

The fund acknowledged the reforms undertaken by the Moroccan authorities to improve its electricity network.

The progress in “liberalising the electricity market should encourage the transition to renewable energy”.

While the gradual reduction of the fiscal deficit over the next three years looks “appropriate”, the country can accelerate the pace of fiscal consolidation in the medium term, the IMF added.

“This will require completing the reform of the tax system, including of the VAT [value added tax], improving tax administration, rationalising spending, including the transfers to state-owned enterprises, and expanding the use of the Unified Social Registry to all social programmes.”

Another area where Morocco has initiated structural reforms relates to state-owned enterprises, which in turn should help stimulate private investment, together with further efforts to strengthen the fight against corruption and address anticompetitive practices, the IMF said.