Morocco suffered various mutually reinforcing shocks in 2022, marked by a severe drought that explains almost half of the 2022 deceleration. This coincided with a global economic slowdown and rising international commodity prices - fueled by Russia's invasion of Ukraine. In this context, real GDP growth fell from 8 % in 2021 to 1.3 % in 2022. As the effects of these shocks fade away, growth is accelerating in 2023, supported by the partial recovery of agricultural production, the rebound of the tourism sector, and the positive contribution of net exports. Real GDP annual growth increased to 3 % in the first half of 2023.
The September 8 Al Haouz earthquake has had devastating human and material impacts but is unlikely to derail the ongoing economic acceleration. The most affected areas have a modest contribution to the overall GDP and are weakly integrated into the national economy. From a macroeconomic perspective, the main risk is that the earthquake will adversely impact the tourism sector. However, preliminary evidence suggests that conditions have normalized quickly in most destinations. The authorities have announced an ambitious reconstruction and development plan for the High Atlas Mountain region, which could positively affect growth in the medium term.
In line with the decline in global commodity prices, inflation is on a downward trend, from a peak of 10.3 % (y/y) in February 2023 to 5 % in August. This has prompted the Central Bank (BAM) to pause the monetary tightening cycle and keep the interest rates unchanged at 3 %, following three consecutive policy rate hikes, for a cumulative 150 basis points between September 2022 and March 2023. Although lower price subsidy pressures have attenuated strains on public finances, this windfall has not yet reduced overall spending as the government rolls out key reforms, injects liquidity into state-owned enterprises (SOEs), and addresses the water crisis.
The Government of Morocco has embarked on an ambitious reform program. The new Mohamed VI investment fund and the recently approved investment charter aim to support a private sector-led, job-creating growth model. The new centralized SOE ownership agency and other SOE governance reforms aim to improve the sector's strategic management and performance. Another major objective is strengthening human capital by universalizing access to health care and social protection and improving the quality of education. The successful implementation of these reforms will be crucial in putting Morocco on the path to more robust and inclusive growth.
Morocco's external resiliency has been relatively strong in the face of multiple global disturbances, such as the COVID-19 pandemic and the war in Ukraine. The country has sustained a stable currency, reinforced its external liquidity buffers, maintained good access to international financial markets, and continued to attract large volumes of foreign direct investment (FDI). It has also had remarkable success in tradeable sectors, including the rapid growth of its automotive industry, the consolidation of the Tangier port as a leading logistical hub, and the transformation of the phosphate sector into a significant provider of fertilizers for Africa.
Last Updated: Nov 15, 2023