Overview

  • Since its appointment in April, 2017, Morocco’s government coalition led by the Justice and Development Party (PJD) has moved along with rolling out the pro-poor reforms initiated under the previous government, focusing mainly on social protection programs, job creation and reducing economic disparities across the country. 

    Following up on Royal guidance, the government is currently working to develop a new Development model for the country based on enhanced education and vocational training programs and bolder policies to boost job creation and promote inclusive growth through a modernized Social protection system.  

    On the cabinet front, the 6-party government coalition is gradually showing signs of lack of cohesion ahead of the critical 2021 legislative elections. Recurrent social crisis, namely with the recent contractual teachers’ strike movement, are putting pressure on the government to ensure proper social services and promote equitable development. The coming months will determine whether the implementation of the planned new Development model will cement government’s position around a strategic development agenda that will set the country to meet its ambitions of inclusive growth and deep economic transformation. 

    On the economic front, Real GDP growth slowed down in 2018 to an estimated 3 percent compared to 4.1 percent in 2017, owing to the decline of agricultural value-added growth, which was only partially compensated by otherwise good performance of nonagricultural activities. Mining activities contributed the most to growth apart from agriculture, mostly driven by phosphates production and exports. The unemployment rate slightly decreased to 9.8 percent, yet it masked a protracted decline in the labor force participation, which dropped by 0.5 percentage point to 46.2 percent. With an exchange rate pegged to a basket of euro and U.S. dollar, inflation remained below 2 percent.  

    Fiscal deficit fell short of the authorities’ target, which did not allow to generate the envisaged savings in the context of low growth. On the revenue side, measures to improve tax collection through extension of the tax base, harmonization of tax rates, and efforts to fight tax evasion compensated for the impact of weaker economic activity on tax revenue. On the expenditure side, rising global energy prices led to higher subsidy outlays. Overall, fiscal deficit stood at 3.6 percent of GDP, the same level as in 2017, and the public debt ratio has been stable at around 65 percent of GDP.  

    The external position remains solid, despite the recent deterioration of the current account due to the impact of higher prices of imported energy. Consistent with the government’s fiscal tightening measures, the current account deficit has fallen considerably since 2012, but the trade deficit has risen reflecting lack of competitiveness and increasing energy dependence. The decline in oil prices since mid-2014 contributed to a reduction in the current account deficit to 3.6 percent of GDP in 2017. However, despite the turnaround of exports, the decrease was reversed in 2018, and the deficit estimated to have grown to 4.3 percent of GDP. At the same time, net FDI flow increased by 25.9 percent and tourism receipts increased by 1.5 percent, while remittances declined by 1.7 percent.  

    Over the medium term, economic performance is expected to improve enabled by sound fiscal and monetary policies, more consistent sector strategies, and an improved investment environment, all of which are aimed at supporting gradual competitiveness gains. While growth is expected to drop to 2.9 percent in 2019 due to low projected increase of agricultural output after two exceptional years, growth will stabilize around an average of 3.6 percent over the medium term. The overall fiscal deficit is expected to converge to 3 percent of GDP by 2021, resulting in a downward path for public debt ratio, provided that the government maintains its current path of fiscal consolidation and improves the efficiency of public investment. External public financing requirements are a moderate concern, given the relatively low public external debt and Morocco’s investment-grade ratings on international markets. Regarding external imbalances, the current account deficit is expected to stay below 4 percent of GDP due to growth of exports, tourism receipts and remittances, which will offset increasing energy import costs. 

    Last Updated: Apr 01, 2019

  • Morocco is at a turning point in its history to create high and inclusive growth, taking advantage of positive trends in the Moroccan society, including urbanization and the demographic transition. A new Country Partnership Framework for Morocco (CPF) was designed to support Morocco’s efforts to successfully navigate this crucial point in its history and was discussed by the Board of Executive Directors on February 19, 2019.  

    Leveraging the combined strengths of the IBRD, IFC and MIGA, the CPF incorporates objectives of INDH and the Government’s program and Medium-Term Strategy 2017-21 and INDH, both of which aim at improving social cohesion and reducing social and territorial disparities. 

    The CPF covering the Fiscal years 2019 to 2024 has the overarching goal of contributing to social cohesion by improving the conditions for growth and job creation and reducing social and territorial disparities. To achieve this objective, the CPF pursues three strategic focus areas:  

    (A) Promoting Job Creation by the Private Sector; (B) Strengthening Human Capital; and  

    (C) Promoting Inclusive and Resilient Territorial Development. Governance and Citizen Engagement are the foundational principles of the CPF, and Gender and Digital Technology are cross-cutting themes.  

    The three strategic areas of focus, the foundation and the cross-cutting themes strongly complement each other. The promotion of private sector-led job creation, a pivotal element in achieving better productivity and competitiveness outcomes, will help Morocco achieve a business environment that supports the development of micro, small and medium enterprises (MSMEs) while attracting more foreign investment and increasing youth employability.  

    Private sector-led job creation will require the development of key competencies to meet the demands of an increasingly competitive job market. Strengthening the country’s human capital is therefore a critical requirement to meet this ambition, as highlighted in the WBG’s Human Capital Index. The CPF will focus on interventions that enhance education and health sector outcomes, promote early childhood development, and establish innovative social protection programs, all within an integrated targeting system.  

    The strategic focus area dedicated to promoting inclusive territorial development will strengthen territorial services and infrastructure, water resources management and spatially targeted interventions wherever needed. Governance and Citizen Engagement, which represent a pivotal foundation in implementing the CPF, will be mainstreamed across the WBG portfolio with a focus on improved resources management, transparency, and building citizen capacity to engage with government and monitor the progress of public sector programs.  

    With the Moonshot Approach shaping a new way of doing business in the Middle East and North Africa, the CPF features digitalization as a cross-cutting theme. Transitioning to digital platforms in government, finance and public services will help Morocco develop new drivers of growth by supporting digital entrepreneurship, e-transactions, and e-government. 

    Empowering women and girls for shared prosperity, which is the other key cross-cutting theme of our engagement in Morocco, is at the forefront of the CPF’s objectives. WBG support will contribute to addressing the constraints young women face in accessing the labor market and finance and strengthening their business and entrepreneurial skills.  

     

    Last Updated: Apr 01, 2019

  • The following results are expected under each CPF Strategic area of focus:  

    • Promoting Job Creation by the Private Sector: More efficient environment for business and competitiveness; Increased opportunities for private sector growth with a focus on MSMEs and youth employability; and Increased access to finance. 
    • Strengthening Human Capital: Improved access to quality early childhood development services; Improved quality and effectiveness of education systems; Improved quality and efficiency of health delivery systems; and Strengthened social protection for the poor and vulnerable. 
    • Promoting Inclusive and Resilient Territorial Development: Improved performance of key infrastructure delivery services of cities and agglomerations; Improved access to sustainable water resources; Enhanced adaptation to climate change and resilience to natural disasters.  

    Last Updated: Apr 01, 2019

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LENDING

Morocco: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments


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Additional Resources

Country Office Contacts

7, Rue Larbi Ben Abdellah, Souissi-Rabat, Morocco
Rabat, + (212)-537-544-200
ialaoui@worldbank.org