Overview

  • Since its appointment in April 2017, Morocco’s government coalition led by the Justice and Development Party (PJD) has rolled 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. 

    The government is currently working to develop a new model of economic development 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.  

    However, the 6-party government coalition is gradually showing signs of a lack of cohesion ahead of critical 2021 legislative elections. Recurrent social crises, such as the recent teachers’ strike movement, have pressure on the government to ensure proper social services and promote equitable development.

    After royal intervention, a new government was announced on October 9, 2019, in which the number of ministers was reduced from 38 to 24.  

    On the economic front, growth has slowed down below its potential, constrained by a volatile, rainfed, agricultural sector and slow growth in the tertiary sector. Real GDP slowed to 2.7 percent in 2019, while non-agricultural growth improved by 3.4 percent (compared to 3 percent in 2018), driven by the better performance of phosphates, chemicals, and textiles. Thanks to sound monetary policy and ample supplies of fresh food, inflation has remained low, under 0.6 percent. The unemployment rate declined slightly to 9.3 percent in Q1-2019 (from 9.8 percent in Q1-2018), underlined by a protracted fall in the labor force participation, which dropped to 46.1 percent.

    Given spending pressures and weaker revenue growth, the fiscal deficit did not decline as expected and stalled at 3.6 percent of GDP in 2019 (against 3.7 percent of GDP in 2018), impacted by higher wage bill and subsidies. The wage bill increased due to the rolling out of the social dialogue agreement adopted in April 2019, while rising subsidies reflect the higher consumption of Liquid Petroleum Gas (LPG). A national Tax Conference was organized in May 2019 to generate consensus around an overhaul the tax system: the next step on tax reform is the approval of the multiannual programming framework law, which  will bring together relevant recommendations from the Tax Conference and serve as a reference for the next budget laws.

    Morocco’s external position, while sustainable, has some vulnerabilities stemming from structural trade deficits driven by the weak competitiveness of exports and dependence on energy imports. The country’s current account balance dropped to about 4.3 percent of GDP in 2019 compared to 5.5 percent of GDP in 2018, helped by declining import prices, especially of energy, as well as a decline in the import of intermediate and consumer goods.

    Over the medium term, growth is projected to pick up gradually, mainly driven by more dynamic secondary and tertiary activities, bolstered by high foreign investments. In particular, significant FDIs continue to flow into automotive industries, especially the new Peugeot plant that will eventually double the sector’s production capacity, as well as into logistics and trade services following the expansion of the Tangiers port. The medium-term outlook assumes sustained reforms, including those designed to maintain fiscal restraint, strengthen tax revenues, improve the governance and oversight of state-owned enterprises, enhance exchange rate flexibility, and reform the business environment and labor markets. 

    In the fiscal area, subsidy policies will continue, especially for LPG consumption. A hedging system will be put in place to protect the budget against any surge in oil prices. In order to control the wage bill, the government intends to rationalize the creation of new public positions by opting for human resources redeployments at sectoral and territorial levels. Consequently, the fiscal deficit is forecast to slightly improve, averaging 3.5 percent of GDP over 2020–2021. The current account balance is expected to gradually improve over the forecast period due to the growth of manufacturing exports – especially automobiles, electronics, and chemicals – and rising tourism receipts, supported by a price easing of the main imported commodities and goods. 

    Last Updated: Oct 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: Oct 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: Oct 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