Morocco

Government spending has been picking up in recent years through both increased revenues and increased debt issuance. Debt service remained just below the African average at 5.5% of GPP in 2024, but it is expected to rise to 6.9% in just two years. The government has expressed interest in issuing a Eurobond valued in USD1bn in 2025. While debt levels still provide the finance ministry some leeway to continue borrowing, some state-owned enterprises are highly indebted, which represents a potential fiscal risk for the government. Morocco’s water and energy utility company accumulates the equivalent of 8% of total public-sector debt. Morocco’s government is in the midst of reforming some of the troubled SOEs by opening them to private sector ownership (which is expected to raise almost USD1bn in 2024) and with lending from the World Bank.

The Moroccan Central Bank governor pointed towards a full flexibilization of the Moroccan dirham, currently pegged in a EUR-USD basket with a fluctuation band of ±5%. However, according to the central bank governor, successful inflation targeting should be achieved before a full flexible exchange. In 2024, the dirham appreciated by 2%+, among the best performing currencies in Africa. International reserves are currently at a record high, given increased foreign direct investment, tourism income and robust remittances that persist at record levels.

The economic growth of the Moroccan economy over the last decade has been driven by an overall increase of all major economic sectors, notably services, government and manufacturing, and to a lesser extent agriculture and construction. Yet, the extraction sector has experienced a sharp decline since the Covid-19 pandemic, driven by global price fluctuations. The value of Morocco’s main export, phosphates, decreased by -25% from the 2021 peak to 2023, but has already showed signs of growth in 2024. In the mid-term, phosphates as well as other extracting activities are expected to grow, given the increase in volume capacity, as well as the large number of natural resources available in the Western Sahara region. Automobiles follow phosphates as the top Moroccan export. The North African economy is currently among the top car exporters to the EU, exporting above 500k cars in 2023, similar to China, Japan and South Korea. Morocco's successful car industry follows years of investment by European carmakers like Renault and Stellantis, aiming to boost competitiveness within their costs and mitigate the risks associated with offshoring.