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Overview

With a growth rate of 7.9 percent, the Moroccan economy rebounded in 2021, recovering the output losses experienced during the first year of the pandemic. However, a series of overlapping shocks led to an abrupt deceleration of economic activity, and GDP growth dropped to just 0.3 percent in the first quarter of 2022. This was due to the impact of yet another drought, the third one in the last four years, which will lead to a sharp contraction in agricultural GDP. In addition, as an importer of energy and food, Morocco has been strongly impacted by the commodity price shocks triggered by the war in Ukraine.

Inflation has picked up in recent months, reaching 8 percent in August. The government has adopted various measures to mitigate the effects of these price pressures on households and specific sectors of the economy, including a substantial increase in the volume of public resources allocated to pre-existing subsidies on butane gas, flour, and sugar. This exerts additional pressure on public spending, although a rebound in tax revenues allows the government to reduce the budget deficit. In response to the inflationary surge, the central bank has increased the policy interest rate by 50 basis points to 2 percent, the first tightening of monetary policy since the beginning of the pandemic outbreak.

The authorities remain committed to an ambitious structural reform agenda aimed at placing Morocco on a more solid and equitable growth path. This effort has so far focused on the social sectors, with a historic move to universalize access to the national health insurance and family allowance systems. The government is also moving ahead with various policies that could unlock the private sector's potential. These include the reform of Morocco's large state-owned enterprise (SOE) system and a review of the investment charter. In addition, the operationalization of the Mohammed VI fund could help catalyze private investment in key sectors of the economy.

Climate risks are becoming increasingly apparent in Morocco. The current drought is causing a sharp reduction in cereal crops that coincides with the stress that global food markets are undergoing due to the war in Ukraine, posing a challenge to food security. In addition, the water volumes stored in Morocco´s main dams have hit historical lows, implying that should rainfall levels not recover in the coming months, various cities could begin to face severe shortages. The authorities are responding to this threat by accelerating the water desalination program.

Last Updated: Oct 20, 2022

of rural roads have been constructed or rehabilitated in Morocco as a result of the Rural Roads Project out of a target of 15,500 km

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

*Amounts include IBRD and IDA commitments
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Rabat
Meryam Benjelloun
+212 537 544 200