OECD Economic Surveys Morocco 2024
Executive summary
September 2024
• Morocco’s robust recovery continues, despite the earthquake and droughts
• Further policy measures would support efforts to boost productivity
• More high-quality formal jobs and higher participation would raise living standards
• Stronger climate policies are needed, including to deal with water stress
2 . OECD ECONOMIC SURVEY OF SPAIN 2023 – EXECUTIVE SUMMARY
About the OECD
The OECD is a unique forum where governments work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate domestic and international policies.
About the Country Studies Branch
The Country Studies Branch helps countries reform providing the best information and analysis. Our Economic Surveys assess a country’s economic condition in a tailored way, with special features illuminating the most pressing challenges the country is facing. The Surveys set out concrete steps policymakers could take to deliver reforms to make growth work for all, making economies more resilient and raising well-being. We have been conducting Surveys for over 60 years, each one of them based on close engagement with national authorities. These relationships of trust enable us to gain insight into the reforms that improve people’s lives. Our teams all have the ‘reform state of mind’, and our expertise, perspective and history help governments adopt it too.
The full book is accessible at OECD ECONOMIC SURVEYS: MOROCCO 2024
OECD Publishing, Paris https://doi.org/10.1787/80777ea7-en
© OECD 2024
The use of this work, whether digital or print, is governed by the Terms and Conditions to be found at http://www.oecd.org/termsandconditions.
MOROCCO’S ROBUST RECOVERY CONTINUES, DESPITE THE EARTHQUAKE AND DROUGHTS
Growth has rebounded from the pandemic and the energy crisis, despite the 2023 earthquake and droughts. Morocco has embarked on major reforms to encourage investment and to enhance social protection, but a stronger convergence path will be needed to achieve the vision in the New Development Model.
Economic activity continues to recover, driven by consumption, investment, and robust export performance. Strong investment is being driven by high capacity utilisation and will be spurred by government incentives under the new Charte de
l’Investissement. Inflation has declined as food prices have moderated, creating room to ease policy interest rates in June 2024. Financial risks appear under control due to robust bank capital buffers and adequate provisioning, though non-performing loans are elevated.
3-year change in GDP at market prices
Morocco has benefitted from a stable macroeconomic regime. The deficit is narrowing following the pandemic and energy crisis and the government debt ratio is around 70% of GDP. Active fiscal policy helped manage recent shocks to the economy, but the deficit is now narrowing as the economy recovers and with significant but broadly offsetting measures on both spending and taxation. Existing plans to reduce the deficit to 3% by 2026 should be implemented. A new fiscal rule should be based on a medium-term debt target and an expenditure rule to help manage future spending pressures.
Reforms have extended health insurance coverage and social assistance, replacing some
energy subsidies. This will improve the lives of many Moroccans, while making social support more effective.
To finance reforms and broaden the tax base, informality needs to be reduced and specific revenues could be increased. Improving incentives in the tax-benefit system by lowering contribution rates for lower-income earners, moving transactions online and strengthening tax enforcement would bring in additional revenue, allowing for reductions in some rates. Royalties from mining and dividends from state-owned enterprises are currently low. Additional revenues could be raised from taxes on emissions.
The range of high-quality, timely statistics and data is low compared to international best practices, which complicates the implementation of well-
designed policies. The statistical system should be re-organised and investment made to improve the availability of timely and high-quality statistics.
FURTHER POLICY MEASURES WOULD SUPPORT EFFORTS TO BOOST PRODUCTIVITY
Labour productivity has been increasing and FDI flows have been strong, but domestic private investment is low, and Moroccan firms face obstacles in performing better.
Morocco’s labour productivity gap with the frontier remains large, although it has narrowed. Multinationals in a few sectors drive manufacturing productivity, but linkages with the local economy could be strengthened. Local value-added remains focused on less sophisticated activities. Moroccan firms are internationally competitive in a decreasing number of products and export less high-tech, though more medium-high-tech goods than in the past. Widespread informality and small firm sizes set back productivity growth.
Investment by the public sector and stateowned enterprises (SOEs) has been strong, and the new Charte de l’Investissement aims to raise private investment through subsidies and measures to improve business conditions. While infrastructure is relatively good, capital formation has been dominated by the public sector and investment efficiency has been low. Public sector investment should be better targeted and managed. New incentives and supporting measures, such as providing land and improving the business climate, aim to raise private investment. Ensuring that incentives are balanced between new and established sectors would help broaden the industrial base.
Percentage gap with respect to the USA in GDP per person employed, 2022
Efforts have been made to improve the business climate. The Competition Council has been strengthened. SOEs play a significant role in the economy and their governance could be further strengthened in line with on-going reforms to ensure a level playing field.
The anti-corruption framework has been strengthened, but more can be done. Firms report bribes adding to transaction costs in interactions with the public administration. Continuing efforts to tackle corruption and making further progress to move transactions online would reduce the scope for corruption.
Innovation activity and spending are low and the take-up of digital technologies by Moroccan firms and workers is slow. Ensuring continuing
competitive internet access, greater consumer protection in e-commerce and targeted digital training for workers would help to make the most of new digital opportunities. Developing better support for innovation would help create new business opportunities.
Skills and educational outcomes should be reinforced to support a more productive economy. Basic literacy and numeracy skills have improved, but educational outcomes remain relatively weak and many young people still leave school at an early age. A major reform to the school system is underway to improve teaching. A workplace-based vocational and more marketoriented tertiary education would better prepare young people for the labour market and improve the match of supply to skills needs.
MORE HIGH-QUALITY FORMAL JOBS AND HIGHER PARTICIPATION WOULD RAISE LIVING STANDARDS
Morocco’s young population is an asset, but the labour market suffers from informality, high youth unemployment and low female employment. Emigration is significant.
Major reforms are under way to extend social insurance and tackle widespread informality that leads to low wages, poor-quality jobs and weak skills. Informal firms and employment are particularly common in low-skilled and more rural settings. Past reforms formalised some activities by recognising self-employment and entrepreneurs. Ongoing reforms extend social assistance and health insurance, alongside registration with a new social register, which could be linked with the employment
3. Informality is widespread Note:
agency to facilitate transition to work and improve matching. An integrated approach is needed to improve incentives for workers and businesses to formalise and strengthen enforcement and sanctions over time. Lowering social contribution rates for low-income workers, taking into account the impact on formalisation when setting the minimum wage and easing strict employment protection legislation would help.
Share of informal employment
Excluding agriculture
There is scope to better integrate women and young people in the labour market. The participation rate of women is low and has been declining. A range of measures including better access to finance, reducing discrimination and tackling gender stereotypes would help strengthen women’s role in the labour market. Extending
subsidised childcare to children of younger ages would help women to work. Youth unemployment is high, including for new graduates. Streamlining the range of active labour market policies and strengthening activation requirements would help young people to find work.
Note: Labour force divided by population groups. Source: ILO Labour Force Survey.
STRONGER CLIMATE POLICIES ARE NEEDED, INCLUDING TO DEAL WITH WATER STRESS
Morocco has made an ambitious commitment to reduce carbon emissions by 45% by 2030 compared to 2010 and to net zero by 2050, benefiting from the country’s potential for renewables-based generation. However, the country is vulnerable to climate change and already faces significant water stress.
While Morocco currently has fairly low per capita emissions, these would rise significantly in a business-as-usual scenario as the economy grows. The government should implement the climate transition measures set out in the net zero to 2050 strategy. A broad-based approach to carbon pricing and taxation, backed by regulations and supports at sectoral level as needed, would help deliver the climate transition in an efficient way, including by raising taxes on motor fuels over time.
Water, which is largely consumed by agriculture, is increasingly scarce as average rainfall has declined and will be challenged further as urbanisation and industry develops. Hydrological tensions are exacerbated by the low price of water for users. Alongside existing efforts to improve the infrastructure, water prices should be raised to reflect the cost of providing it and its scarcity, while taking into account social impacts.
Figure 5. Water scarcity is a growing concern
Renewable freshwater resources per capita
cubic meters
Source: World Bank World Development Indicators database.
