MOROCCO ECONOMIC MONITOR Prioritizing reforms to boost the business environment Winter 2025 Morocco Economic Update Prioritizing reforms to boost the business environment Winter 2025 Middle East and North Africa Region © 2025 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclu- sions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or fail- ure to use the information, methods, processes, or conclusions set forth. 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TABLE OF CONTENTS List of Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .vii Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Résumé Analytique . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi ‫ ملخص تنفيذي‬. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv 1.  Recent Economic Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 The drought continues to take a toll on the Moroccan economy, but non-agricultural growth has accelerated, driven by the industrial sector and investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Despite some recent improvements in urban areas, job creation remains a critical challenge . . . . . . . . . . . .3 The external position of the Moroccan economy has strengthened considerably . . . . . . . . . . . . . . . . . . . . . . .7 The footprint of the public sector on the Moroccan economy is on the rise . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 2.  Outlook and Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 3.  Morocco’s Business Climate, Insights from the B-Ready Dataset . . . . . . . . . . . . . . . . . . . . . . 17 The B-Ready approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Morocco in the 2024 B-Ready Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 A frontier analysis to prioritize reforms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Cross-cutting themes: digital transformation, environmental sustainability and gender . . . . . . . . . . . . . . . . . 22 Appendix 1: B-Ready Sub-Indicators, Frontier Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Selected Recent World Bank Publications on Morocco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Summary of Special Focuses from the Latest Morocco Economic Updates . . . . . . . . . . . . . . . . . . 29 iii List of Figures Figure 1 Despite adverse climatic conditions, non-agricultural growth remained resilient… . . . . . . . . . . . . . .2 Figure 2 …driven mainly by manufacturing and extractive industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Figure 3 Investment has emerged as the main driver of growth… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Figure 4 …household confidence indicators remain weak, while business’ confidence has strengthened. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Figure 5 Inflation has dropped below 1 percent…. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Figure 6 …allowing BAM to ease monetary policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Figure 7 Insufficient job creation is resulting in a sustained increase in inactivity and unemployment… . . . 4 Figure 8 …there are pronounced differences in the employment trends of urban vs. rural areas . . . . . . . . . 4 Figure 9 The Moroccan economy is still recovering the output loss caused by recent shocks… . . . . . . . . . 5 Figure 10 …average post-pandemic non-agricultural growth has only modestly accelerated . . . . . . . . . . . . . 5 Figure 11 Social norms surrounding the acceptability of women’s employment . . . . . . . . . . . . . . . . . . . . . . . . 7 Figure 12 The current account deficit has narrowed… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Figure 13 …as Morocco becomes an increasingly export-oriented economy. . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Figure 14 FDI inflows towards Morocco are on a clear upwards trend… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Figure 15 …bolstered by an improved perception of the country’s risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Figure 16 The budget deficit has declined significantly… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Figure 17 …and the debt to GDP ratio has begun to decline after the COVID surge. . . . . . . . . . . . . . . . . . . . . 9 Figure 18 Most components of public revenues and expenditures have risen significantly faster than nominal GDP since the pandemic outbreak . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 Figure 19 The share of Morocco’s territory under dry conditions has decreased, but remains well above historical averages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Figure 20 The medium-term budget foresees the gradual fiscal consolidation to continue . . . . . . . . . . . . . .13 Figure 21 Comparative results by pillar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Figure 22 Comparative results by topic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Figure 23 Results by topic and pillar, frontier analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 List of Tables Table 1 Selected Economic Indicators 2021–2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 List of Boxes Box 1 How gender social norms and structural constraints and inequalities interact to determine women’s work in Morocco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Box 2 Medium-term orientation of Morocco’s public finances according to the 2025 Budget Law . . . . 13 Box 3 From the Doing Business Report to the Business Ready Dataset . . . . . . . . . . . . . . . . . . . . . . . . . . 18 iv MOROCCO ECONOMIC UPDATE – PRIORITIZING REFORMS TO BOOST THE BUSINESS ENVIRONMENT LIST OF ACRONYMS BAM Bank-Al-Maghrib IFC International Finance Corporation CIT Corporate Income Tax IMF International Monetary Fund CPI Consumer Price Index MEF Ministry of Economy and Finance CRI Regional Investment Center MENA Middle East and North Africa EMBI Emerging Market Bond Index MTI Macro Trade and Investment EMDEs Emergent markets and Developing NDM New Development Model Countries NPL Non-Performing Loans FDI Foreign Direct Investment PIT Professional Income Tax FLFP Female Labor Force Participation POV Poverty GDP Gross Domestic Product SOE State-Owned Enterprise GEP Global Economic Prospects VAT Value Added Tax GoM Government of Morocco WB World Bank HCP High Commission of Planning v ACKNOWLEDGEMENTS T he Morocco Economic Monitor is a semiannual The authors are grateful to Moustapha Ndiaye report from the World Bank economic team on (Country Director for the Maghreb), Eric Le Borgne recent economic developments and economic (Practice Manager, Economic Policy), and policies. This report presents our current outlook for Abdoulaye Sy (Lead Country Economist, Economic Morocco. Its coverage ranges from the macroecon- Policy) for invaluable comments during the review omy, financial stability and private sector development, of this report as well as senior staff from the Ministry to human development. It is intended for a wide audi- of Finance. Special thanks to Ekaterina Georgieva ence, including policy makers, business leaders, finan- Stefanova (Senior Program Assistant, MTI) for her cial market participants, and the community of analysts administrative support. The findings, interpretations, and professionals engaged in Morocco. and conclusions expressed in this Monitor are those The Morocco Economic Monitor is a product of World Bank staff and do not necessarily reflect of the Middle East and North Africa (MENA) unit in the views of the Executive Board of the World Bank Economic Policy Global Practice of the World Bank or the governments they represent. Group. The report was prepared by Javier Diaz- For information about the World Bank Cassou (Senior Economist, Economic Policy), Amina and its activities in Morocco, please visit www. Iraqi (Economist, Economic Policy), Thami El Maaroufi worldbank.org/en/country/morocco(English), www. Senior Private Sector Specialist, FCI), Federica worldbank.org/ar/country/morocco(Arabic), or www. Marzo (Senior Economist, POV) and Hajar Kabbach banquemondiale.org/fr/country/morocco (French). (Consultant, POV), Zeina Afif (Senior Social Scientist, For questions and comments on the content of DIME); Kaliope Azzi-Huck (Senior Education Specialist, this publication, please contact Javier Diaz Cassou EDU); Dana Ghazi Nabeeh Qarout (consultant, DIME). (jdiazcassou@worldbank.org). vii EXECUTIVE SUMMARY D espite the drought causing a modest decel- the components of aggregate supply (phosphates) eration of overall GDP growth to 3.2 per- and demand (investment) that drove the acceleration cent, the Moroccan economy has exhibited in 2024 decline somewhat, while remaining robust. some encouraging trends in 2024. Non-agricultural Overall, this paints a positive economic outlook, with growth has accelerated to an estimated 3.8 percent, inflation under control, a lower-than-average current driven by a revitalized industrial sector and a rebound account deficit, solid external liquidity buffers, a con- in gross capital formation. Inflation has dropped tinuing gradual fiscal consolidation, and an evenly below 1 percent, allowing Bank al-Maghrib to begin poised balance of risks. easing its monetary policy. While rural labor markets Yet, insufficient job creation remains a fun- remain depressed, the economy has added close to damental challenge. Over the past decade, the 162,000 jobs in urban areas. Morocco’s external posi- working-age population has grown by more than tion remains strong overall, with a moderate current 10 percent, while employment has increased by only account deficit largely financed by growing foreign 1.5 percent. This structural job creation gap can be direct investment inflows, underpinned by solid inves- attributed to several factors, including the significant tor confidence indicators. Despite significant spending cumulative effects of post-pandemic shocks, the lim- pressures, the debt-to-GDP ratio is slowly declining. ited discernible impact of current policies and reforms Real GDP growth is expected to accelerate on economic growth, and gender social norms that to 3.6 percent in 2025. Satellite data reveal that, constrain women’s participation in the labor market. while climatic conditions remain challenging, they As discussed in the previous edition of this report, have improved compared to last year, which should another contributing factor is a lack of dynamism in allow for a partial recovery of output. Agricultural GDP the Moroccan private sector, which is characterized is hence projected to expand by 4.5 percent, assum- by a slow emergence of high-growth firms, critical ing a modest increase in cereal production and con- contributors to job creation in other countries. This tinued trends in higher value-added irrigated crops. situation may reflect underlying shortcomings within In contrast, non-agricultural growth is projected to the business environment. decelerate slightly to 3.5 percent. This is largely due The B-Ready dataset offers a valuable to a base effect, as the high growth rate of some of tool to prioritize reforms to continue improving ix Morocco’s business climate. Morocco has per- contributing to a high prevalence of informality and cre- formed well overall in the first edition of the B-Ready, ating a stark “insiders-outsiders” gap. In dispute reso- tending to outperform countries at a similar income lution, substantial gaps exist in procedural certainty, level on the assessment of regulatory frameworks and the organizational structure of courts, and the digitiza- public sentences, but not on operational efficiency, tion and transparency of processes, which are crucial which is critical for public policies to have an impact for reducing uncertainty for companies and boost- on business dynamics. A frontier analysis with leading ing investor confidence. In the area of insolvency, the countries provides a more nuanced assessment, high- main issues are related to the completion of the legal lighting significant gaps that could be addressed with framework, the digitization of key services for liquidat- well targeted reforms. In the labor market, Morocco ing struggling companies, and improving the timeli- faces significant obstacles and costs to hire formally, ness and efficiency of reorganization proceedings. x MOROCCO ECONOMIC UPDATE – PRIORITIZING REFORMS TO BOOST THE BUSINESS ENVIRONMENT RÉSUMÉ ANALYTIQUE E n dépit de la sécheresse qui a légèrement duction céréalière et du maintien de la croissance freiné la croissance globale du PIB à 3.2 %, des cultures irriguées à plus forte valeur ajoutée. l’économie marocaine a montré des signes En revanche, la croissance non agricole devrait légè- prometteurs en 2024. La croissance du secteur rement ralentir pour s’établir à 3,5 %, en raison prin- non agricole s’est accélérée, pour atteindre un taux cipalement d’un effet de base. Le taux de croissance estimé à 3,8 %, tirée par le dynamisme du secteur élevé de certaines composantes de l’offre globale industriel et la reprise de la formation brute de capital. (comme les phosphates) et de la demande (notam- L’inflation est passée sous la barre des 1 %, permet- ment l’investissement) qui ont contribué à l’accéléra- tant à Bank Al-Maghrib de commencer à assouplir sa tion de la croissance en 2024 a quelque peu diminué, politique monétaire. Bien que les marchés du travail tout en restant robuste. Dans l’ensemble, les perspec- ruraux demeurent stagnants, l’économie a généré tives économiques restent positives, avec une infla- près de 162 000 emplois en milieu urbain. La position tion maîtrisée, un déficit du compte courant inférieur extérieure du Maroc reste globalement solide, avec à la moyenne, des réserves de liquidités extérieures un déficit du compte courant modéré, largement solides, la poursuite progressive de l’assainissement financé par l’augmentation des flux d’investissements des finances publiques et une répartition équilibrée directs étrangers et soutenu par des indicateurs de des risques. confiance des investisseurs robustes. Malgré des Cependant, la création insuffisante d’em- pressions budgétaires importantes, le ratio dette/PIB plois demeure un défi fondamental. Au cours de poursuit sa lente diminution. la dernière décennie, la population en âge de tra- La croissance du PIB réel devrait s’accé- vailler a augmenté de plus de 10 %, tandis que l’em- lérer pour atteindre 3,6 % en 2025. Les données ploi n’a progressé que de 1,5 %. Cet écart structurel satellitaires indiquent que, bien que les conditions cli- en matière de création d’emplois s’explique par plu- matiques demeurent difficiles, elles se sont amélio- sieurs facteurs, notamment l’impact cumulé des rées par rapport à l’année précédente, ce qui devrait chocs post-pandémiques, l’effet encore limité des favoriser une reprise partielle de la production. Le politiques et réformes actuelles sur la croissance PIB agricole devrait ainsi augmenter de 4,5 %, sous économique, ainsi que des normes sociales liées au l’hypothèse d’une augmentation modeste de la pro- genre, qui restreignent la participation des femmes xi au marché du travail. Comme mentionné dans l’édi- avec les pays les plus performants fournit une éva- tion précédente de ce rapport (publié en juillet 2024), luation plus nuancée, mettant en évidence des écarts un autre facteur contributif est le manque de dyna- significatifs qui pourraient être comblés grâce à des misme du secteur privé marocain, avec peu d’entre- réformes ciblées. Sur le marché du travail, le Maroc prises à forte croissance, essentielles à la création fait face à des obstacles et à des coûts élevés lies d’emplois selon l’expérience d’autres pays. Cette à l’embauche dans le secteur formel, ce qui favorise situation pourrait refléter des faiblesses structurelles une forte prévalence du travail informel et accentue le sous-jacentes dans l’environnement des affaires. fossé entre les « insiders » et les « outsiders ». Dans La base de données B-Ready peut servir la résolution des litiges, des lacunes importantes per- pour prioriser les réformes visant à poursuivre sistent en matière de sécurité juridique, de structure l’amélioration du climat des affaires au Maroc. organisationnelle des tribunaux, ainsi que de numé- Dans l’ensemble, le Maroc a obtenu de bons résul- risation et de transparence des processus, autant tats dans la première édition du rapport B-Ready, d’éléments essentiels pour réduire l’incertitude pour surpassant en grande partie les pays de niveau de les entreprises et renforcer la confiance des inves- revenu similaire en matière d’évaluation des cadres tisseurs. Enfin, dans le domaine de l’insolvabilité, les réglementaires et des services publiques. Toutefois, il principaux défis concernent l’achèvement du cadre affiche des performances moins favorables en termes juridique, la numérisation des services clés liés à la d’efficacité opérationnelle, un facteur clé pour que les liquidation des entreprises en difficulté, ainsi que politiques publiques puissent réellement influencer la l’amélioration de la rapidité et de l’efficacité des pro- dynamique des entreprises. Une analyse comparative cédures de réorganisation. xii MOROCCO ECONOMIC UPDATE – PRIORITIZING REFORMS TO BOOST THE BUSINESS ENVIRONMENT ‫ملخص تنفيذي‬ ‫وانخفــاض العجــز يف الحســاب الجــاري بنحــو أقــل مــن املتوســط‪،‬‬ ‫عــى الرغــم مــن الجفــاف الــذي تســبب يف تباطــؤ متواضــع يف منــو‬ ‫ووجــود احتياطيــات نقديــة خارجيــة قويــة‪ ،‬واســتمرار ضبــط أوضــاع‬ ‫ـريب‬‫ـاد املغـ‬ ‫ـر االقتصـ‬ ‫ـد أظهـ‬ ‫ـكيل إىل ‪ ،3.2%‬فقـ‬ ‫ـج املحـ‬ ‫ـي الـ‬ ‫ـايل الناتـ‬ ‫إجـ‬ ‫املاليــة العامــة تدريجيــا‪ ،‬وتوزيــع متــوازن للمخاطــر‪.‬‬ ‫بعــض االتجاهــات املشــجعة يف عــام ‪ .2024‬فقــد تســارعت وتــرة‬ ‫ومــع ذلــك‪ ،‬فــإن ضعــف خلــق فــرص العمــل يشــكل‬ ‫النمــو غــر الزراعــي إىل مــا يقــدر بنحــو ‪ ،% 3.8‬مدفوعــة بتنشــيط‬ ‫تحديــا جوهريًــا‪ .‬فعــى مــدى العقــد املــايض‪ ،‬زاد عــدد الســكان يف‬ ‫القطــاع الصناعــي وانتعــاش إجــايل تكويــن رأس املاالإلجــايل‪.‬‬ ‫ســن العمــل بأكــر مــن ‪ ،% 10‬يف حــن مل تشــهد العاملــة إال زيــادة‬ ‫وانخفــض معــدل التضخــم إىل أقــل مــن ‪ ،% 1‬مــا ســمح لبنــك‬ ‫بنســبة ‪ % 1.5‬فقــط‪ .‬وميكــن أن ترجــع هــذه الفجــوة الهيكليــة يف‬ ‫املغــرب بالبــدء يف تخفيــف سياســته النقديــة‪ .‬ويف حــن أن أســواق‬ ‫خلــق فــرص العمــل إىل عــدة عوامــل؛ مبــا يف ذلــك اآلثــار الرتاكميــة‬ ‫ـاد‬‫ـود‪ ،‬إال أن االقتصـ‬ ‫ـن الركـ‬ ‫ـاين مـ‬ ‫ـق الريفيـ‬ ‫ـة ال تـزال تعـ‬ ‫العمـ‬ ‫ـل يف املناطـ‬ ‫الكبــرة لصدمــات مــا بعــد الجائحــة‪ ،‬والتأثــر املحــدود للسياســات‬ ‫أضــاف مــا يقــرب مــن ‪ 162‬ألــف فرصــة عمــل يف املناطــق الحرضيــة‪.‬‬ ‫واإلصالحــات الحاليــة عــى النمــو االقتصــادي‪ ،‬واألع ـراف االجتامعيــة‬ ‫وتظــل الوضعيــة الخارجيــة للمغــرب قويــة بشــكل عــام‪ ،‬مــع عجــز‬ ‫املتعلقــة باملســاواة بــن الجنســن‪ ،‬والتــي تقيــد مشــاركة املــرأة يف‬ ‫متوســط يف الحســاب الجــاري‪ ،‬يتــم متويلــه بشــكل كبــر مــن خــال‬ ‫ســوق العمــل‪ .‬وكــا نوقــش يف اإلصــدار الســابق مــن هــذا التقريــر‪،‬‬ ‫تدفقــات االســتثامرات األجنبيــة املبــارشة املتزايــدة‪ ،‬وبدعــم مــن‬ ‫هنــاك عامــل آخــر يتمثــل يف نقــص الديناميكيــة يف القطــاع الخــاص‬ ‫مــؤرشات ثقــة املســتثمرين القويــة‪ .‬وعــى الرغــم مــن الضغــوط‬ ‫املغــريب‪ ،‬الــذي يتســم ببــطء نشــوء الــركات ذات النمــو املرتفــع‪،‬‬ ‫ـايل‬ ‫ـي اإلجـ‬ ‫ـج املحـ‬ ‫ـن إىل الناتـ‬‫ـبة الديـ‬ ‫ـإن نسـ‬ ‫ـات‪ ،‬فـ‬ ‫ـى النفقـ‬ ‫ـرة عـ‬‫الكبـ‬ ‫وهــي عوامــل أساســية تســاهم يف خلــق فــرص العمــل يف بلــدان‬ ‫تتناقــص ببــطء‪.‬‬ ‫أخــرى‪ .‬وقــد يعكــس هــذا الوضــع ثغ ـرات كامنــة يف بيئــة األعــال‪.‬‬ ‫ومــن املتوقــع أن يتســارع منــو إجــايل الناتــج املحــي‬ ‫وتتيــح مجموعــة بيانــات تقريــر جهوزيــة األعــال ألنشــطة‬ ‫الحقيقــي إىل ‪ % 3.6‬يف عــام ‪ .2025‬وتكشــف بيانــات األقــار‬ ‫األعــال أداة قيمــة إلعطــاء األولويــة لإلصالحــات التــي تهــدف‬ ‫ـوي‬ ‫ـة ال تـزال تنطـ‬ ‫ـروف املناخيـ‬ ‫ـن أن الظـ‬ ‫ـم مـ‬‫ـى الرغـ‬ ‫ـه عـ‬ ‫الصناعيـ‬ ‫ـة أنـ‬ ‫مواصلــة تحســن منــاخ األعــال يف املغــرب‪ .‬وبشــكل عــام‪ ،‬فقــد‬ ‫عــى تحديــات‪ ،‬إال أنهــا تحســنت مقارنــة بالعــام املــايض‪ ،‬األمــر الــذي‬ ‫حقــق املغــرب نتائــج جيــدة يف اإلصــدار األول مــن تقريــر جهوزيــة‬ ‫مــن شــأنه أن يســمح بانتعــاش جــزيئ للناتــج‪ .‬وبالتــايل‪ ،‬فمــن املتوقــع‬ ‫ـل يف‬ ‫ـتوى الدخـ‬ ‫ـل املامثـ‬ ‫ـدان ذات مسـ‬ ‫ـى البلـ‬‫ـوق عـ‬‫ـث تفـ‬ ‫ـال‪ ،‬حيـ‬ ‫األعـ‬ ‫ء عــى‬ ‫أن ينمــو إجــايل الناتــج املحــي الزراعــي بنســبة ‪ ،% 4.5‬بنــا ً‬ ‫ـتوى‬ ‫ـى مسـ‬ ‫ـس عـ‬ ‫ـن ليـ‬‫ـة‪ ،‬ولكـ‬ ‫ـكام العامـ‬ ‫ـر التنظيميـ‬ ‫ـة واألحـ‬ ‫ـم األطـ‬‫تقييـ‬ ‫فرضيــة زيــادة معتدلــة يف إنتــاج الحبــوب واســتمرار منــو املحاصيــل‬ ‫الكفــاءة التشــغيلية‪ ،‬التــي تعتــر حاســمة لــي يكــون للسياســات‬ ‫ـن‬ ‫ـل‪ ،‬فمـ‬ ‫ـة‪ .‬ويف املقابـ‬‫ـة العاليـ‬‫ـة املضافـ‬ ‫ـري ذات القيمـ‬ ‫ـى الـ‬‫ـدة عـ‬ ‫املعتمـ‬ ‫العامــة تأثــر عــى ديناميكيــة الــركات‪ .‬ويقــدم تحليــل لحــدود‬ ‫املتوقــع أن يتباطــأ النمــو غــر الزراعــي قليــاً إىل ‪ .% 3.5‬ويرجــع‬ ‫العمــل مــع بلــدان رائــدة تقييــا أكــر دقــة‪ ،‬حيــث يســلط الضــوء‬ ‫ذلــك بشــكل رئيــي إىل تأثــر فــرة األســاس‪ ،‬حيــث أن معــدل النمــو‬ ‫عــى الفجــوات الكبــرة التــي ميكــن معالجتهــا مــن خــال إصالحــات‬ ‫املرتفــع لبعــض مكونــات العــرض الــكيل (مثــل الفوســفات) والطلــب‬ ‫دا‪ .‬ويف ســوق الشــغل‪ ،‬يواجــه املغــرب عقبــات‬ ‫مســتهدفة جيــ ً‬ ‫(خاصــة االســتثامر) التــي ســاهمت يف تســارع النمــو يف عــام ‪،2024‬‬ ‫ـاع‬‫ـهم يف ارتفـ‬ ‫ـا يسـ‬ ‫ـمي‪ ،‬مـ‬‫ـاع الرسـ‬‫ـف يف القطـ‬ ‫ـرة للتوظيـ‬‫ـف كبـ‬ ‫وتكاليـ‬ ‫قــد انخفــض قليــاً‪ ،‬مــع بقائــه قويــا‪ .‬وبشــكل عــام‪ ،‬يرســم هــذا‬ ‫كبــر للقطــاع غــر الرســمي ويخلــق فجــوة واضحــة بــن «الداخلــن»‬ ‫الوضــع آفاقــا اقتصاديــة إيجابيــة‪ ،‬يف ظــل الســيطرة عــى التضخــم‪،‬‬ ‫‪xiii‬‬ ‫تتعلــق املشــاكل الرئيســية الرئيســية باســتكامل اإلطــار القانــوين‪،‬‬ ‫و»الخارجــن»‪ .‬ويف مجــال حــل النزاعــات‪ ،‬توجــد فجــوات كبــرة يف‬ ‫ورقمنــة الخدمــات الرئيســية لتصفيــة الــركات املتعــرة‪ ،‬وتحســن‬ ‫اليقــن اإلج ـرايئ‪ ،‬والهيــكل التنظيمــي للمحاكــم‪ ،‬ورقمنــة العمليــات‬ ‫رسعــة وكفــاءة إجــراءات إعــادة التنظيــم‪.‬‬ ‫وشــفافيتها‪ ،‬وهــي أمــور بالغــة األهميــة للتقليــل مــن عــدم اليقــن‬ ‫بالنســبة للــركات‪ ،‬وتعزيــز ثقــة املســتثمرين‪ .‬ويف مجــال اإلعســار‪،‬‬ ‫‪xiv‬‬ ‫‪MOROCCO ECONOMIC UPDATE – PRIORITIZING REFORMS TO BOOST THE BUSINESS ENVIRONMENT‬‬ 1 RECENT ECONOMIC DEVELOPMENTS The drought continues to take a toll and accelerating the transformation of the agri- on the Moroccan economy, but non- cultural sector. Cereal production (mostly rainfed) agricultural growth has accelerated, dropped by 43 percent in the 2023–24 agricultural driven by the industrial sector and campaign, to 31.2 million quintals compared to investment 55 million in the previous year. Low dam levels con- tinued to force the authorities to prioritize water for Real GDP growth remained overall steady in human consumption, impacting irrigated production 2024, but this stability conceals notable shifts as well. However, some export-oriented crops, pre- in the drivers of economic activity. At 3.1 percent, dominantly irrigated and increasingly reliant on desal- average growth in the first three quarters was identi- inated water, continued to perform, as evidenced by cal in 2023 and 2024. However, as opposed to last a 3.1 percent increase in agricultural and agro-indus- year, activity appears to be accelerating in recent trial exports y/y in 2024 (Jan–Nov). This highlights a months (growth in Q3-2024 reached 4.3 percent, growing divide in the agricultural sector, where rain- against 3 percent in Q3-2023). The composition of fed and irrigated crops dependent on surface water growth has also changed. On the supply side, agri- allocations struggle with climate change, while higher cultural value added, which positively contributed to value-added irrigated crops using groundwater and/ economic growth in 2023, has contracted in 2024 or unconventional water resources continue to ben- due to adverse climatic conditions. In contrast, non- efit from Morocco’s advantageous access to key agricultural growth has accelerated, driven by a revi- export markets. Despite this, the strong performance talized industrial sector. On the demand side, after a of the latter couldn’t offset the former’s weakness, sluggish 2023, gross capital formation is showing sig- leading to a 4.9 percent contraction in overall agri- nificant dynamism in 2024, whereas the recovery of cultural GDP during the first three quarters of 2024. household consumption is progressing more slowly Non-agricultural growth has gained pace amid weak confidence indicators. in recent months, with industrial activity offset- Morocco continues to experience a pro- ting a slowdown in services. While non-agricultural longed drought, severely affecting key crops annual growth remained stable in the first semester 1 Despite adverse climatic conditions, FIGURE 1 •  …driven mainly by manufacturing FIGURE 2 •  non-agricultural growth remained and extractive industries. resilient… Secondary sector growth Contribution to Real GDP growth 30 30 Percentage points 25 Covid-19 Global supply Pandemic distruptions 20 5 20 4 15 10 10 Percentage Percentage 3 2 5 0 1 0 –10 0 –5 –1 –10 –20 –2 –15 –30 –3 –20 2022-Q1 2022-Q2 2022-Q3 2022-Q4 2023-Q1 2023-Q2 2023-Q3 2023-Q4 2024-Q1 2024-Q2 2024-Q3 –25 –40 2019–Q1 2020–Q1 2021–Q1 2022–Q1 2023–Q1 2024–Q1 2019–Q3 2020–Q3 2021–Q3 2022–Q3 2023–Q3 2024–Q3 Primary sector Secondary sector Tertiary sector Real GDP growth Construction Manufacturing Mining, quarrying (rhs) Source: World Bank calculations staff and HCP. Source: World Bank calculations staff and HCP. of 2024, a significant acceleration is observed in the tion, the chemical sector contributed an additional third quarter, with y/y growth rising from 3.2 percent 19 percent of the growth in industrial value added. in 2023 to 5.4 percent in 2024. As a result, average The construction sector also played a key role, con- non-agricultural growth for the first three quarters of tributing to 18 percent of industrial value-added the year rose from 3.3 percent in 2023 to 4 percent growth between 2023 and 2024. It has rebounded in 2024. Considerable changes can be observed in from six consecutive quarterly contractions until mid- the composition of non-agricultural growth. Services 2023 to achieve a 6.9 percent annual expansion have decelerated from 4.8 percent in 2023 (Jan–Sep) in Q3 of 2024. This renewed dynamism is linked to 3.3 percent in 2024 despite a double-digit expan- to public policies, including ongoing infrastructure sion of international tourists’ arrivals. This decelera- investments and the government’s new direct finan- tion was more than offset by a remarkable turnaround cial support for homebuyers. More in line with recent of the industrial sector, which moved from a y/y con- years, the strong post-COVID performance of the traction of 0.6 percent in January-September 2023 to automotive sector persists, contributing to 21 per- 5 percent growth in the same period of 2024, reach- cent to the growth in industrial value added in 2024. ing 7.6 percent in Q3. Investment is leading the recovery of aggre- Industrial dynamism is led by phosphates gate demand. After six consecutive quarters of neg- and fertilizers, along with construction. The sec- ative growth, gross capital formation resumed its ondary sector’s substantial recovery following recent expansion towards the end of 2023, rising by 9 per- disruptions (Figure 2) is explained by the strong per- cent year-on-year between January and September formance of a few industrial branches. Extractive 2024. This recovery in gross capital formation has industries accounted for nearly 27 percent of the been supported by both public and private invest- total increase in industrial value added observed ment, as the government advances key infrastructure from Q1 to Q3 of 2024, driven by the pull of phos- projects and foreign direct investment (FDI) sees a phate production and a stabilization of prices fol- notable increase of 24.7 percent year-on-year in 2024. lowing a challenging 2023. The large fluctuations However, at nearly 29.2 percent of GDP, gross invest- undergone by the sector over recent years stem ment remains below a historical average of around from geopolitical shocks, global supply disruptions 32 percent between 2014 and 2022. Household con- and trade restrictions. With strong linkages to phos- sumption expanded by 3.3 percent, bolstered by phates due to the prominence of fertilizer produc- subsiding inflation, robust remittances, and the gov- 2 MOROCCO ECONOMIC UPDATE – PRIORITIZING REFORMS TO BOOST THE BUSINESS ENVIRONMENT Investment has emerged as the main FIGURE 3 •  …household confidence indicators FIGURE 4 •  driver of growth… remain weak, while business’ confidence has strengthened. Contribution to Real GDP growth Percentage points Household’s and Industry Confidence Surveys 10.0 (Indices) 8.0 90 90 80 80 6.0 70 70 4.0 60 60 2.0 50 50 0.0 40 40 –2.0 30 30 20 20 –4.0 10 10 –6.0 0 0 2019–Q1 2020–Q1 2021–Q1 2022–Q1 2023–Q1 2024–Q1 2019–Q2 2019–Q3 2019–Q4 2020–Q2 2020–Q3 2020–Q4 2021–Q2 2021–Q3 2021–Q4 2022–Q2 2022–Q3 2022–Q4 2023–Q2 2023–Q3 2023–Q4 2024–Q2 2024–Q3 2022-Q1 2022-Q2 2022-Q3 2022-Q4 2023-Q1 2023-Q2 2023-Q3 2023-Q4 2024-Q1 2024-Q2 2024-Q3 Private Consumption Government Consumption Capacity utilization rate (percent) (RHS) Gross capital formation Net exports Household's confience index Source: World Bank staff calculations and HCP. Source: WB staff calculations, HCP and BKAM. ernment’s new cash transfer “Direct Social Aid” pro- and after four consecutive pauses, it began review- gram. It might still be constrained by low levels of ing its monetary policy stance in June 2024, reducing household confidence, which according to HCP’s the policy rate by 25 basis points (bp) to 2.75 per- index is yet to recover following the inflation shock cent. After keeping it unchanged in September, (Figure 4). Lastly, the contribution of net exports to BAM reduced the policy rate by an additional 25 bp real GDP growth has shifted from positive to negative in December. While BAM’s policy aligns with global since the second half of 2023, as tends to be the case easing trends, it stands out regionally as other North when domestic demand accelerates. African central banks have not yet started reversing The recovery of domestic demand has the monetary policy tightening given more persistent been supported by a rapid disinflation process. inflationary pressures than in Morocco (Figure 6). Annual headline inflation has decreased from a peak Overall, this reflects positively on Bank al-Maghrib’s of 10.1 percent in February 2023 to just 0.9 percent management of the recent inflationary shock, the first on average 2024 (Figure 5). This decrease has been of its kind in decades. led by the evolution of food and energy prices, which were the key items originally impacted by the global supply shocks. However, core inflation has also Despite some recent improvements dropped from a peak of 8.5 percent in February 2023 in urban areas, job creation remains to an average of 2.4 percent in 2024, indicating that a critical challenge as the supply shocks dissipate, a broader easing of price pressures is taking place across the economy. Recent trends in urban labor markets indicate Two-year inflation expectations have fallen substan- some positive developments. In 2024, approxi- tially, and currently stand at 2.3 percent. mately 162,000 jobs were created in urban areas, Bank al Maghrib (BAM) is the first central compared to 41,000 in 2023. This represents a bank in North Africa to initiate a relaxation of its 2.5 percent increase in urban employment. The mod- monetary policy stance after the inflation shock. est increase in the urban unemployment rate observed BAM had originally responded to the shock with three in 2024 (from 16.8 to 16.9 percent) indicates that policy rate hikes for a cumulative 150 basis points the active urban population has grown slightly faster (bp). Following the decline in inflationary pressures than the employed urban population, which is not Recent Economic Developments 3 Inflation has dropped below 1 FIGURE 5 •  …allowing BAM to ease monetary FIGURE 6 •  percent… policy. Contribution to inflation Decrease in policy rate/Inflation Percentage points percent 12.0 –1.2 8 10.0 7 –1.0 8.0 6 –0.8 6.0 5 –0.6 4 4.0 3 2.0 –0.4 2 0.0 –0.2 1 –2.0 Dec-21 0 0 Feb-22 Apr-22 Jun-22 Aug-22 Oct-22 Dec-22 Feb-24 Apr-24 Jun-24 Aug-24 Oct-24 Dec-24 Feb-23 Apr-23 Jun-23 Aug-23 Oct-23 Dec-23 ECB Jordan FED Morocco UK Kuwait Tunisia Algeria Cumulative policy rate decrease (since January 2024) Food products Non-food products Headline inflation Average inflation (2024, latest data available)-rhs Source: WB staff calculations and BAM. Source: WB staff calculations and BAM. Insufficient job creation is resulting FIGURE 7 •  …there are pronounced differences FIGURE 8 •  in a sustained increase in inactivity in the employment trends of urban and unemployment… vs. rural areas. Activity and unemployment rate Employed Population, Morocco, 2015–2024 (in percent) (in thousands) 47 16 7,000 46 14 6,500 12 45 6,000 10 Rural, Urban 44 5,500 8 43 6 5,000 42 4 4,500 41 2 4,000 40 0 3,500 2019–Q1 2020–Q1 2021–Q1 2022–Q1 2023–Q1 2024–Q1 2024–Q4 2019–Q2 2019–Q3 2019–Q4 2020–Q2 2020–Q3 2020–Q4 2021–Q2 2021–Q3 2021–Q4 2022–Q2 2022–Q3 2022–Q4 2023–Q2 2023–Q3 2023–Q4 2024–Q2 2024–Q3 Q1-2015 Q3-2015 Q1-2016 Q3-2016 Q1-2017 Q3-2017 Q1-2018 Q3-2018 Q1-2019 Q3-2019 Q1-2020 Q3-2020 Q1-2021 Q3-2021 Q1-2022 Q3-2022 Q1-2023 Q3-2023 Q1-2024 Q3-2024 Activity rate Unemployment rate (rhs) Urban Rural Source: WB staff calculations based on WDI. Source: WB staff calculations based on WDI. inherently a negative outcome. In stark contrast, dur- indicators have been on a downward trajectory for ing the same period employment dropped by 1.9 per- several years, particularly the labor force participa- cent in rural areas (mostly non-salaried), and the rural tion rate, which has declined by nearly 4.6 percent- active population dropped by 1.5 percent. age points over the past decade (2.3 points since However, long-term trends reveal a struc- 2019), and the unemployment rate, which remains tural job creation challenge. Over the past decade, over 4.1 percentage points higher than pre-pan- Morocco’s employed population has increased by demic levels (Figure 7). Again, these aggregate sta- close to 1.5 percent, while the nation’s total popula- tistics mask significant differences between urban tion and the working age population have increased and rural labor markets: while the urban (mostly sal- by 8.8 and 11.4 percent respectively according to aried) employed population has increased by nearly the 2024 census. In this context, most labor market 24% over the past decade (though at a slower pace 4 MOROCCO ECONOMIC UPDATE – PRIORITIZING REFORMS TO BOOST THE BUSINESS ENVIRONMENT FIGURE 9 • The Moroccan economy is still …average post-pandemic non- FIGURE 10 •  recovering the output loss caused agricultural growth has only by recent shocks… modestly accelerated. Deviation of GDP from pre-pandemic forecasts 20 6 15 Average growth 4 Average growth 2022–2024 2 10 2015–2019 3.4 percent 3.3 percent 0 5 –2 –4 0 –6 –5 –8 –10 –10 –12 –15 –14 2019 2020 2021 2022 2023 2024 –20 2015–Q1 2016–Q1 2017–Q1 2018–Q1 2019–Q1 2020–Q1 2021–Q1 2022–Q1 2023–Q1 2024–Q1 ALB BRA FRA GAB MOR TUN UK US JOR Source: WB staff calculations, IMF World Economic Outlook. Source: WB staff calculations and HCP. since the pandemic), the rural (mostly non-sala- The government’s reform agenda has the ried) employed population has decreased by 22% potential to boost growth and job creation, but (Figure 8).1 This disparity reflects a confluence of fac- its impact on economic activity has been modest tors, including rising water scarcity impacting rural so far. Some of the policies launched in recent years livelihoods, rapid productivity growth in Morocco’s that could boost potential growth include: (i) an ambi- agricultural sector leading to reduced labor inten- tious human capital agenda focused on revamping sity, and the ongoing shift towards a more service- health and social protection systems and improving oriented economy (Dalvit et al., 2024). the quality of education; (ii) a reform of State-Owned Insufficient job creation partly reflects the Enterprises aimed at enhancing public sector effi- comparatively large cumulative impact of the ciency and creating a level playing field for private post-COVID shocks. Recent editions of this report businesses; (iii) the deployment of public subsidies have praised Morocco for its capacity to cope with for job-creating private investment projects; and severe exogenous disruptions and adopt ambitious (iv) a broad tax reform which is mitigating distortions policies to mitigate impacts on households and firms, and disincentives rooted in Morocco’s tax system. avoid what in a weaker policy setting could have Additionally, the government is engaged in large-scale turned into a full-blown crisis, and thus preserve over- public investment programs, including investments all macroeconomic stability. However, the Moroccan in water infrastructure, preparations for the 2030 economy is yet to recover the output losses caused by the shocks, which has hindered job creation. This 1 Labor market statistics reveal other significant dispari- is evident when comparing actual GDP to pre-pan- ties between urban and rural areas. According to lat- demic projections, which reveals a significant cumu- est figures, in urban areas, remunerated employment lative impact compared to most peer economies accounts for 97.8% of total employment, compared to (Figure 9). The disparity between the recovery of just 79.1% in rural areas. Moreover, while 71.9 percent real GDP in Morocco and that of its peers reflects of remunerated workers in urban areas are wage work- ers, that proportion only reaches 55.6% in rural areas. the compounding impact of the drought discussed In other words, close to 70 percent of the employed in above, which has exacerbated the effects of the urban areas are wage workers, against just 44 percent global shocks undergone by the world economy in in rural areas. Therefore, the trend depicted in Figure 8 recent years. also reflect a shift from non-salaried to salaried work. Recent Economic Developments 5 Football World Cup, and reconstruction efforts in the over time, and by a preponderance of micro-enter- High Atlas provinces affected by the 2023 Al Haouz prises with more limited potential to grow and cre- earthquake. Despite these efforts, average nonagri- ate good jobs. The missing middle that characterizes cultural growth after the post-pandemic rebound has Morocco’s private sector is confirmed by the recent only slightly accelerated (Figure 10). economic census completed by HCP, which shows Certain features of the private sector con- that firms with 10 to 49 employees contribute to only tribute to explain Morocco’s structural job cre- 13.1 percent of total employment, compared with ation deficit. International evidence points at the 32.7 percent for firms with 50 or more employees, and disproportionate contribution that High Growth Firms 54.2 percent for firms with less than 10 employees. (HGFs) tend to have for the creation of decent jobs Chapter 3 provides new evidence on Morocco’s busi- (Goswami and Medvedev, 2019). Yet, recent micro- ness climate using the recently launched World Bank evidence for Morocco shows that the country’s formal B-Ready indicators, helping identify some of the fac- firms struggle to grow, and that HGFs have a lim- tors that may be hinder firms’ dynamics in Morocco. ited footprint in the economy (Dalvit et al., 2024). As Structural constraints to Female Labor a result, the corporate sector is characterized by the Force Participation (FLFP) pose another crucial presence of a few large firms that play an outsize role challenge. FLFP has dropped significantly over the in the economy but add a limited number of new jobs past two decades, from 30.4 percent in 1999 to just HOW GENDER SOCIAL NORMS AND STRUCTURAL CONSTRAINTS AND INEQUALITIES INTERACT BOX 1:  TO DETERMINE WOMEN’S WORK IN MOROCCO Social norms significantly influence women’s work in Morocco, interacting with structural constraints and inequalities to explain low female labor force participation. Social norms are behavioral rules individuals follow based on community expectations and observed behaviors. A new World Bank study in Morocco provides empirical evidence linking social norms, structural constraints, and women’s work. It finds that women’s odds of working are 1.4 times higher under social norms that support women’s work. For instance, when men in households view it as acceptable for spouses to share financial responsibilities, women are 3 times more likely to be working. Moreover, married women are 1.6 times more likely to be working when husbands are unconcerned about community reactions. International evidence shows that countries with restrictive social norms experience sharper declines in female agricultural employment (ranging from less than –2 percent to over –6 percent in low-income countries), exacerbating the negative effects of structural transformation on women’s employment (Eberhard and Sahay 2024a). Restrictive gender norms about household roles create social barriers for women’s employment. Traditional norms position men as breadwinners and women as caregivers, with 63% of respondents stating that a woman’s primary role is managing the home and cooking, regardless of her work status. These norms shape women’s employment opportunities, influencing social acceptance, working conditions, and women’s willingness to participate in the workforce. While 81% of respondents personally accept women working, this acceptance drops under specific conditions: working late (62%), after marriage (61%), or without financial necessity (54%). Additionally, most respondents believe relying on childcare outside the family should begin at age 3, with family care preferred over formal daycare due to concerns about cost, safety, and accessibility. Acceptance of women working falls to 21% when a child under three is present and the mother has to leave the child with someone outside the family. Harassment is also a widespread concern, with only 23% of respondents believing working women are unlikely to face harassment (see Figure 11). Despite the overall decline in female labor force participation (FLFP) in Morocco, many Moroccan women—especially educated and urban women—want to work and tend to be in better-paying jobs. While FLFP has steadily dropped, 90% of women pursuing higher education aim to join the workforce Among non-working women aged 18–55, 48% wish to work, and among all women of that age group, 60% express a desire to work. Urban and highly educated women stand out, as they are three times more likely to enter the workforce and approximately 2.3 times more likely to secure paid employment, even when accounting for social norms. This underscores the critical role of targeted public policies in harnessing the potential of young, educated women and reversing long-term FLFP declines. To enable and sustain women’s participation, public policies should address structural barriers, expand economic opportunities, improve workplace conditions, and ensure safety in public and private spaces. Key measures include increasing access to affordable, high-quality childcare and transport, promoting women’s entrepreneurship through financial inclusion and skill-building, and fostering job creation. Policies must also address existing norms around financial decision-making to support women’s greater economic engagement. (continued on next page) 6 MOROCCO ECONOMIC UPDATE – PRIORITIZING REFORMS TO BOOST THE BUSINESS ENVIRONMENT HOW GENDER SOCIAL NORMS AND STRUCTURAL CONSTRAINTS AND INEQUALITIES INTERACT BOX 1:  TO DETERMINE WOMEN’S WORK IN MOROCCO (continued) FIGURE 11 • Social norms surrounding the acceptability of women’s employment 84.1 62.1 60.1 % expressing support 59.1 56.6 53.0 48.4 46.5 46.3 43.6 40.9 40.2 37.3 37.8 38.2 39.8 37.735.8 32.1 23.2 26.8 29.3 23.0 17.1 Women Women Women Women Women working Working outside Okay for Financially working outside returning working after regularly even if the home does womanto work & providing for the home for pay home after they get interacting their father or not expose leave child under thefamily should 5pm married with men spouse earns a women to 3 years old with not solely be the at work sufficient income harassment someone else responsibility of the man Conditions Individual beliefs Perceived community beliefs Community actions Linear (Individual beliefs) Source: (World Bank, Forthcoming). The underestimation of community support for women’s work creates an opportunity for public policies to align personal beliefs with social expectations. While 81% of individuals personally accept women working, only 56% believe their community shares this view. This misperception is important given the significant role of community expectations in shaping women’s paid employment outcomes. This gap leaves room for targeted information campaigns and media featuring positive role models to correct misperceptions and normalize women’s economic participation. Community-based efforts and early interventions in the education system are also essential, as younger men often hold more restrictive attitudes toward women working compared to older generations. These initiatives can help foster long-term shifts in perceptions and greater acceptance of women’s work. a Gender and Transformation. Andreas Eberhard and Abhilasha Sahay. Background paper to the Jobs for Development Flagship report of the Word bank. 2023. 19.1 percent in 2024, one of the lowest rates globally. The external position of the This decline has occurred despite an improvement in Moroccan economy has strengthened other indicators typically associated with higher FLFP, considerably such as decreasing fertility rates and rising education levels among women. The drop in FLFP is largely due The current account deficit has narrowed mark- to a reduction in agricultural jobs, which hasn’t been edly in recent years. The COVID-19 pandemic seems offset by urban job creation, particularly for women, to have marked a structural break in the evolution of who accounted for only 5.8 percent of new positions. the current account deficit, which fell from an aver- Rural women are often confined to unpaid agricul- age of 5 percent of GDP in the 2010s to just 1.9 per- tural work within the household, while urban women cent since 2020 (data available until Q3-2024) and face barriers like sectoral segregation, non-fam- reached its lowest point in 2023 (0.6 percent of GDP). ily-friendly work conditions, and a lack of childcare This decline in the current account deficit reflects the and safe transport options, all exacerbated by social fall in gross capital formation as a share of GDP that norms strictly defining gender roles and limiting wom- has materialized since the pandemic, which has sub- en’s economic agency (See Box 1). stantially altered the savings-investment balance of Recent Economic Developments 7 The current account deficit has FIGURE 12 •  …as Morocco becomes an FIGURE 13 •  narrowed… increasingly export-oriented economy. 60% 2.0 1.1 1.0 Exports of goods and services 40% 50 as percentage of GDP –0.4 0.0 45 –1.2 –0.7–0.6 –1.0 20% as percentage of GDP –1.1 –1.3 40 –1.7 –2.3 –2.0 as percentage of GDP 0% 35 –2.7 –2.7 –3.0 30 –20% –3.6 –4.0 25 –4.5 –4.5 –4.6 –5.0 20 –40% –6.0 15 –60% –7.0 10 Q3-2020 Q4-2020 Q1-2021 Q2-2021 Q3-2021 Q4-2021 Q1-2022 Q2-2022 Q3-2022 Q4-2022 Q1-2023 Q2-2023 Q3-2023 Q4-2023 Q1-2024 Q2-2024 5 0 2019 2020 2021 2022 2023 2024-Q3 Trade balance Service balance Brazil Chile Egypt Jordan Current transfers Current account balance (rhs) Mexico Morocco Tunisia Türkiye Source: WB staff calculations, Exchange office. Source: WB staff calculations, Haver analytics. the Moroccan economy. More recently, the decline to a base effect following the decline that occurred in of the current account deficit has started reversing, 2023 (Figure 14). As discussed in the previous edition reaching about 1.5 percent of GDP in the first nine of this report, announced greenfield FDI projects have months of 2024, which is consistent with the solid boomed in recent years, indicating an increasing con- recovery of investment that is under way. However, fidence from international investors in the Moroccan the current account deficit remains well below histor- economy, as also reflected by the recent improve- ical averages. ment in country risk indicators (Figure 15). The boost Morocco’s economy is becoming more in investment announcements may also highlight the export-oriented. Exports of goods and services potential opportunities that Morocco could rip from an grew by 6.3 percent year-on-year in 2024. This expan- increasingly fragmented trade environment. Indeed, sion was led by automobiles (+6.3 percent), aero- its strong macroeconomic policy framework, robust nautics (+14.9 percent), phosphates and derivatives infrastructures, proximity to Europe, and preferential (+13.1 percent), and tourism receipts (+7.2 percent). access to key markets seem to be turning Morocco The latest data underscores a post-pandemic trend, into an increasingly attractive destination for investors which has seen the exports of a selected group of seeking to nearshore production or to relocate it away goods and services expand significantly faster than from the countries that are more likely to be affected nominal GDP. As a result, the contribution of exports by mounting trade and geopolitical tensions. These of goods and services to Morocco’s GDP increased global shifts could contribute to explain high profile from 33–35 percent in the years that preceded the investments such as the announced establishment of pandemic to nearly 40 percent on average between an electric battery gigafactory in Morocco. 2022 and 2024 (Figure 13). This is considerably higher than the average for lower and higher middle-income economies (27 and 25 percent of GDP respectively), The footprint of the public sector on holding significant promise for Morocco’s future devel- the Moroccan economy is on the rise opment trajectory. Foreign direct investment is recovering, The budget deficit is steadily returning to pre- and risk indicators have improved. FDI inflows pandemic levels. It closed 2024 at 3.9 percent of have increased by 24.7 percent in 2024, in part due GDP, reflecting the progress made by the authori- 8 MOROCCO ECONOMIC UPDATE – PRIORITIZING REFORMS TO BOOST THE BUSINESS ENVIRONMENT FDI inflows towards Morocco are on FIGURE 14 •  …bolstered by an improved FIGURE 15 •  a clear upwards trend… perception of the country’s risk. Foreign Direct Investment JP Morgan Emerging Markets Bond Index (EMBI) 60,000 1600 50,000 1400 40,000 1200 30,000 1000 Million MAD 20,000 800 10,000 600 0 400 –10,000 –20,000 200 –30,000 0 2017 2018 2019 2020 2021 2022 2023 2024 2020 2021 2022 2023 2024 2025 Inflows Outflows Net FDI Morocco Jordan Egypt Turkey Source: Exchange office and WB staff calculations. Source: J.P. Morgan Emerging Market Bond Index. The budget deficit has declined FIGURE 16 •  …and the debt to GDP ratio has FIGURE 17 •  significantly… begun to decline after the COVID surge. Budget/primary deficit (% of GDP) Central government debt (% of GDP) –0.9 72.2 71.5 –1.3 –1.3 –1.2 69.4 69.5 69.1 –1.5 –1.7 60.3 17.3 17.2 60.1 60.3 60.5 16.0 17.3 58.4 17.0 –2.3 12.4 13.3 13.0 13.0 13.1 –3.2 –3.3 –3.4 –3.2 –3.5 –3.8 –4.0 –3.9 –4.4 –4.8 54.9 54.3 53.4 52.1 52.1 48.1 47.0 46.9 47.2 –5.4 45.3 –5.6 –7.1 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024e 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024e Budget deficit Primary deficit Domestic External Debt Source: Exchange office and WB staff calculations. Source: Exchange office and WB staff calculations. ties since the deficit peaked at 7.1 percent of GDP in public assets and hence are not recurrent in nature, 2020 (Figure 16). As a proportion of GDP, the primary implying that the improvement in Morocco’s structural deficit has already reached levels comparable to fiscal position is more modest than the recent evolu- those observed in the year preceding the pandemic. tion of headline figures suggest. Consequently, the government has managed to steer The recent performance of tax revenues the debt-to-GDP ratio towards a downward trajectory has exceeded expectations, cushioning part of (Figure 17). However, a key component of the fiscal the increase in spending. Tax revenues increased consolidation strategy remains the ongoing sales- by 13 percent in 2024, exceeding the original Budget and-lease-back “innovative financing” operations, Law forecast by almost 11 percent. This dynamism which mobilized close to 2.3 percent of GDP in 2024. reflects the progress achieved with the ongoing tax These operations involve transferring ownership of reform, which has so far focused on the CIT and the Recent Economic Developments 9 Most components of public revenues and expenditures have risen significantly faster than FIGURE 18 •  nominal GDP since the pandemic outbreak. Revenues Expenditures 100 70 90 60 80 70 50 in percent in percent 60 40 50 40 30 30 20 20 10 10 0 0 CIT PIT Domestic VAT Import VAT Excises Registration Customs Non-tax revenues GDP Nominal Compensation of employees Goods and services Subsidies Interests Investment GDP Nominal 2019–2024 2021–2024 2019–2024 2021–2024 Source: WB staff calculations and MEF. Note: the comparison with 2019 captures changes since the pandemic; the comparison with 2021 captures changes since initiation of the implementation of the tax reform. VAT, as well as the government’s increasingly effec- grown significantly faster than nominal GDP during tive efforts at combatting fraud and tax evasion. It is this period (Figures 18). On the revenue side, it is also due to the tax amnesty decreed in 2024, which driven primarily by increased collection of corpo- allowed taxpayers to regularize undeclared taxable rate income tax and value-added tax (the two main income by paying a 5% contribution, generating addi- items covered so far by the ongoing tax reform), fur- tional revenues amounting to approximately 0.4 per- ther bolstered by the expansion of non-tax revenues. cent of GDP. Central government’s expenditures On the expenditure side, subsidies, goods and ser- increased by 5.7 percent in 2024, largely due to a vices spending, and investment have been the key cost-of-living adjustment agreed for civil servants to drivers, although the pace of growth in the former mitigate the impact of the recent inflationary shock. two has slowed since 2021. These trends align with This was partly offset by a reduction in public sub- the New Development Model (NDM) introduced by sidy outlays, resulting from the increase in domestic Moroccan authorities in 2021, which anticipated that butane gas prices decreed in May. the financing needs for implementing the planned The size of the public sector has increased reforms would rise to 4% of GDP in 2022–2025 and markedly since the pandemic. Central govern- then to 10% of GDP by 2030. However, the NDM also ment revenues as a share of GDP have surged by projected that a significant acceleration of economic 3.8 percentage points, rising from 20.4 percent in growth would help cushion such a large fiscal expan- 2019 to 24.1 percent of GDP in 2024, while total sion. As discussed previously, this acceleration is yet expenditure has also climbed by 4.4 percentage to materialize, highlighting the critical importance of points, from 23.7 percent to 28.1 percent of GDP. growth-enhancing reforms not only to achieve the This expansion is evident across most components NDM’s objectives but also to cement the long-term of public revenues and expenditure, which have sustainability of public finances. 10 MOROCCO ECONOMIC UPDATE – PRIORITIZING REFORMS TO BOOST THE BUSINESS ENVIRONMENT 2 OUTLOOK AND RISKS Outlook 2019, suggesting that climatic conditions are still far from normalizing and/or that the country may be con- Real GDP Growth is anticipated to increase verging towards a new, much drier normal in the con- to 3.6 percent in 2025, up from 3.2 percent in text of climate change. In this context, agricultural 2024. This acceleration will be mainly driven by a GDP is projected to partially recover from the contrac- partial recovery in the agricultural sector after the tion experienced in 2023. This projection assumes large contraction in 2024. Non-agricultural growth is a modest increase in cereal production, which will expected to decelerate slightly to 3.5 percent in 2025. still fall below historical averages, and a continua- This slowdown will be concentrated in certain compo- tion of recent trends in higher value-added irrigated nents of aggregate supply (such as phosphates and crops. Consequently, agricultural GDP is expected the chemical industry) and aggregate demand (like to expand by 4.5 percent, a baseline scenario that investment), which are anticipated to return to lower, remains subject to substantial uncertainty and could yet still robust, growth rates. be significantly impacted by adverse weather condi- The agricultural sector continues to face tions in the coming months. uncertain prospects due to adverse climatic con- Non-agricultural growth is expected to slow ditions, yet it is expected to show some improve- down to 3.5 percent in 2025, primarily due to a ment in 2025. The 6-month Standard Precipitation base effect following the robust rebound of key Index, commonly used to monitor droughts based components of aggregate supply and demand in on satellite imagery, indicates an improvement in cli- 2024. Key sectors that sustained the acceleration of matic conditions over the past year. Specifically, the industrial growth in 2024, such as phosphates, the share of Morocco’s territory under dry conditions has decreased from 96 percent in December 2023 to 2 More information about SPI and the methodology used 60 percent in December 2024 (Figure 19).2 However, to track the drought in the Fall 2023 Edition of the this remains significantly above the historical aver- Morocco Economic Update, From Resilience to Shared age of approximately 30 percent between 1981 and Prosperity. 11 FIGURE 19 • The share of Morocco’s territory under dry conditions has decreased, but remains well above historical averages. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Jan-82 Jan-83 Jan-84 Jan-85 Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23 Jan-24 D4 - Exceptionally dry D3 - Extremely dry D2 - Severely dry D1 - Moderately dry D0 - Abnormally dry Normal/Dry W0 - Abnormally moist W1 - Moderately moist W2 - Very moist W3 - Extremely moist W4 - Exceptionally moist Source: World Bank staff using data from National Oceanic and Atmospheric Administration’s (NOAA) Climate Prediction Center (CPC). chemical industry, and construction, are expected to The budget deficit is expected to slowly remain robust in 2025, albeit at a slightly lower growth decline to pre-pandemic levels. The 2025 Budget rate. Conversely, services are expected to maintain Law provides for a continuation of recent fiscal their recent dynamism, sustained by a strong tourism trends, with a significant expansion of public spend- sector stimulated by the organization of major sport- ing (+4.6 percent) driven primarily by the social ing events, including the African Cup of Nations to dialogue commitment to increase salaries, large be held in Morocco. On the demand side, the mod- infrastructure investments, and an increase in social est slowdown in non-agricultural growth will stem pri- spending related to ongoing reforms. Tax revenues marily from a moderation in gross capital formation. are also set to continue increasing (+6.6 percent) However, investment is still expected to grow by a despite the measures included in the 2025 budget healthy 6.7 percent as the government progresses law to reduce personal income tax for middle class with its infrastructure plans, FDI retains its recent households, which will reduce revenues by around dynamism, and private investment benefits from sta- 0.3 percent of GDP. Non-tax revenues will stabilize, ble inflation, monetary policy easing and improved as the government continues to engage in sale and business confidence. Private consumption growth is lease-back “innovative” financing operations to keep expected to remain stable in 2025. the budget deficit under control. Over the medium The current account deficit will slightly term, the authorities plan to reign on current spending widen in 2025; however, it is expected to remain through a more modest increase in salaries and the below historical averages. The ongoing recovery of subsidies’ reform, and to increasingly channel invest- domestic demand and higher agricultural imports are ment through Public Private Partnerships. This would expected to widen the current account deficit to 1.5 and be consistent with a gradual reduction of the budget 1.9 percent of GDP in 2025 and 2026, still significantly deficit over the projection period (3.1 percent of GDP below historical averages. FDI inflows are expected in 2026–2027), already in line with pre-pandemic lev- to accelerate as announced greenfield projects con- els (Box 2). tinue to materialize. Foreign exchange reserves are expected to continue covering close to five months Risks of imports, which in combination with the resources made available by the IMF’s Flexible Credit Line pro- The balance of risks for Morocco’s economy vide a significant cushion against external shocks. appears to be evenly poised. On one hand, the 12 MOROCCO ECONOMIC UPDATE – PRIORITIZING REFORMS TO BOOST THE BUSINESS ENVIRONMENT MEDIUM-TERM ORIENTATION OF MOROCCO’S PUBLIC FINANCES ACCORDING TO THE 2025 BOX 2:  BUDGET LAW This box summarizes key trends in the medium-term budgetary framework (2025–2027). It outlines a gradual fiscal consolidation strategy that builds on the government’s commitment to restoring fiscal margins while addressing urgent priorities, including prioritizing social reforms, stimulating job creation through targeted measures, and advancing the ongoing reform agenda. This fiscal strategy targets a gradual reduction of the budget deficit to 3.1 percent of GDP over 2026–2027, while keeping the debt-to-GDP on a downward trend, to 66.6 percent of GDP by 2027. The medium-term budget recognizes the potential climate-related risks to public finances and identifies budgetary risks associated with State Owned Enterprises and public guarantees. Public spending will continue to expand over the medium-term, while streamlining compensation-related expenditures, subsidies and investment costs. A key priority of the budget is the continued expansion of social protection, including broadening the retirement scheme and implementing unemployment benefits. Current expenditures are expected to increase significantly in 2025 (+14.3 percent y/y), reaching 21.9 percent of GDP, up from 20.1 percent of GDP in 2024, driven by wage increases (9.5 percent) under the social dialogue agreement and debt-related expenditures (25.7 percent), partially offset by the reduction in subsidies (–32.7 percent y/y). However, the pace will reverse in 2026–27, with current expenditures expected to decline to 20.1 percent of GDP, resulting from slower salary growth and continued butane gas subsidy reform. MEF also forecasts investment expenditures to decline as a share of GDP, from 6.9 percent in 2021–2024 to 5.9 percent in 2025–2027. This should be facilitated to a growing resort to Public-Private Partnerships (PPPs). MEF expects rising expenditure to be financed through strong revenue collection. Overall tax revenues are expected to reach an average of 20 percent of GDP between 2025–2027, significantly higher than previous years (+1.7 percent of GDP compared to 2021–24, and +2.7 percent of GDP compared to 2019). In contrast, non-fiscal revenues are projected to stabilize, as the government intends to reduce its reliance on sales and lease-back operations (which will decrease from 2.2 percent of GDP in 2025 to 1.5 percent of GDP in 2026–2027). While the ongoing tax reform focused on the Corporate Income Tax (CIT) in 2023 and the VAT in 2024, the 2025 Budget Law has centered on the Personal Income Tax (PIT), aimed at providing relief to middle-class households and encourage formalization.a As per the framework law approved in 2021, the tax reform should be completed in 2026, which measures that will include the introduction of a carbon tax and provisions to support innovation. FIGURE 20 • The medium-term budget foresees the gradual fiscal consolidation to continue. Budget deficit (percent of GDP) Central government debt (percent of GDP) –7.1 72.2 71.5 69.4 69.5 69.1 69.0 –5.5 67.7 –5.4 66.6 –4.4 –4.0 –3.6 –3.1 –3.1 60.3 –3.3 2019 2020 2021 2022 2023 2024 2025 2026 2027 2019 2020 2021 2022 2023 2024 2025 2026 2027 Source: 2025 Budget Law. a The exemption threshold will be raised from 30,000 to 40,000 MAD, benefiting lower-income individuals. Additionally, tax brackets will be revised and expanded to reduce rates. The top marginal PIT rate will be reduced from 38% to 37%. Other measures include increasing the family charge deduction from 360 to 500 MAD per dependent and revising the conditions for internship exemptions to promote employment. The revenue loss associated with the reform is estimated at about 0.3 percent of GDP country continues to grapple with challenging cli- nue sources such as innovative sales and leaseback matic conditions, which could have a persistent operations will need to be replaced by more sustain- impact on agricultural GDP and rural households. able, recurrent sources to ensure fiscal consolidation. Additionally, spending pressures are likely to strain This could challenge the government’s ability to meet the budget, and the reliance on non-recurring reve- its medium-term fiscal targets. On the other hand, Outlook and Risks 13 Morocco’s ambitious reform agenda, strategic geo- and introducing targeted incentives to stimulate SME graphic position, and strong economic ties through investment. free trade agreements position the economy well to Enhanced transparency regarding bud- benefit from the nearshoring process resulting from getary risks along with the new Organic Law on the fragmentation of global value chains. However, Finance under preparation mark a positive devel- this also exposes the country to the risks posed by opment for Morocco’s economic management. the recent increase in protectionist tensions on the The government has significantly improved the trans- global scene, the prospects of which remain uncer- parency with which it presents budgetary risks, which tain for Morocco. are now explicitly analyzed as part of the medium- Job creation remains the main development term budget. Indeed, the most recent Budget Law challenge facing Morocco’s economy and society includes sensitivity analyses that explicitly analyze the today, necessitating a comprehensive agenda of potential impact of the drought, volatile commodity structural reforms. To address this challenge, it is prices, and a potential slowdown in the euro area, as essential to tackle constraints on both the demand well as expenditure-related risks like transfers to pub- and supply sides of the labor market and to improve lic establishments and public guarantees. In addition, labor regulations and policies. On the demand side, the authorities are working on a new Organic Law on the lack of dynamism among high-growth firms is a Finance expected to introduce significant changes, significant constraint. On the supply side, enhancing including the integration of non-commercial SOEs in conditions for women’s economic empowerment and the scope of the Budget Law and the introduction of aligning young workers’ skills with market needs are a debt-anchored fiscal rule that could provide more crucial. Furthermore, the high costs associated with visibility on the medium-term orientation of public hiring and firing processes, as well as the fragmenta- finances. This proactive approach underscores the tion of labor market programs, hinder progress. The government’s commitment to maintaining macro-fiscal recently unveiled government job creation roadmap stability despite the budget strains that may arise as its emphasizes enhancing active labor market programs ambitious reform and investment programs unfold. 14 MOROCCO ECONOMIC UPDATE – PRIORITIZING REFORMS TO BOOST THE BUSINESS ENVIRONMENT TABLE 1 • Selected Economic Indicators 2021–2027 Estimated Projected 2021 2022 2023 2024 2025 2026 2027 Real Economy Real GDP 8.2 1.5 3.4 3.2 3.6 3.5 3.6 Agricultural GDP 19.0 –11.8 1.6 –4.6 4.5 2.6 2.8 Non-Agricultural GDP 6.9 3.2 3.6 3.9 3.5 3.6 3.7 Industry 7.8 –2.7 1.3 5.1 3.6 3.8 3.9 Services 5.7 6.8 4.4 3.5 3.4 3.5 3.6 Private Consumption 6.8 0.0 3.7 3.2 3.1 3.2 3.4 Government Consumption 7.2 3.0 4.1 3.9 4.1 3.6 3.5 Gross Fixed Capital formation 7.5 –4.0 1.9 9.1 6.7 4.5 4.5 Exports, Goods and Services 7.9 20.5 8.8 8.3 7.7 8.3 7.1 Imports, Goods and Services 10.4 9.5 7.4 11.1 8.1 7.4 6.5 Unemployment rate (ILO definition, in percent) 12.3 11.8 13 13.3 — — — Inflation (average CPI, in percent) 1.4 6.6 6.1 0.9 2.4 1.8 1.5 Fiscal accounts Expenditures 31.2 34.1 32.7 34.6 34.8 33.0 32.3 Revenues, including all grants 25.3 28.7 28.4 30.7 31.2 29.6 29.0 Budget Balance –6 –5.4 –4.3 –3.9 –3.7 –3.4 –3.3 Central Government Debt 69.4 71.5 69.5 69.1 68.2 67.5 66.6 Balance of payments Current Account balance –2.3 –3.6 –0.6 –1 –1.5 –1.9 –2.1 Imports, Goods and Services 42.4 56.3 51.1 52 53.5 54.6 55.1 Exports, Goods and Services 33.2 44.8 42.8 43.1 44.3 45.1 45.4 Foreign Direct Investment 1.1 1.2 0.2 1.5 1.6 1.7 1.7 Gross official reserves (bln US$, eop) 35.6 32.3 36.3 37.1 39.6 40.9 42.1 In months of imports 5.3 5.4 5.4 5.1 5.3 5.4 5.5 Local currency per U.S. dollar (period average) 9 10.2 10.1 — — — — Memo items Nominal GDP (in billion dirhams) 1277 1331 1463 1524 1616 1702 1790 Source: Moroccan authorities and World Bank staff estimates. Note: CPI = Consumer Price Index; ILO = International Labor Organization; … = Not available. Outlook and Risks 15 MOROCCO’S BUSINESS 3 CLIMATE, INSIGHTS FROM THE B-READY DATASET T he New Development Model sets an ambi- This initiative succeeds the Doing Business program, tious vision to turn private investment into the which was discontinued in 2021, and aims to provide main engine of economic growth in Morocco. a more nuanced, balanced, and comprehensive anal- The successful implementation of that vision will be ysis of the business environment worldwide (Box 3). key to create jobs at scale, the most effective way to It delves into the regulatory framework, the quality of defeat poverty and improve welfare. This will require public services, and the effectiveness of their prac- a healthy business environment, broadly defined tical implementation, organized around themes that as the conditions that are needed for a vibrant pri- are deemed essential to private sector development. vate sector to emerge. Recent evidence on firms’ B-READY is the result of extensive consultations with dynamics suggest that the Moroccan private sector international experts, academics, practitioners, and is characterized by the slow emergence of innova- stakeholders from both the public and private sec- tive, high-growth, job creating enterprises, which may tors. Its primary goal is to serve as a reference tool be due in part to weaknesses in the business envi- for governments and the private sector, guiding them ronment.3 The new B-Ready dataset discussed in this towards reforms that can boost investment, develop special focus chapter can serve as a tool to priori- entrepreneurship, create jobs, and foster sustainable tize the policies and reforms that have the greatest and inclusive economic growth. potential to close existing gaps between Morocco’s The program examines ten key topics cov- business climate and that of leading nations. ering the entire life cycle of a company, from start- ing a business to resolving insolvency, including accessing public utilities, the labor market, finan- The B-Ready approach cial services, international trade, taxation, dis- pute settlement, and markets and competition. The World Bank Group has ushered in a new era This holistic approach also incorporates crucial in assessing the global business climate with the launch of its Business Ready (B-READY) program. 3 Source: Dalvit et al., 2024. 17 BOX 3: FROM THE DOING BUSINESS REPORT TO THE BUSINESS READY DATASET The launch of the new Business Ready (B-READY) program marks a significant methodological shift in the World Bank’s approach to business climate assessment. The Doing Business report faced criticism for its reliance on aggregate country rankings, which often overshadowed the nuances of the structural reforms needed to improve the business climate, fostering instead a competition between nations aiming for higher rankings, with limited impacts on the real economy. B-READY departs from this approach by dropping aggregate rankings and focusing instead on disaggregated, quantifiable indicators grouped by thematic scores and pillars. This methodology provides nuance in the analysis of each economy’s strengths and weaknesses, allowing for a more granular identification of areas requiring priority reforms. B-READY significantly expands the scope of business climate assessments. It now includes areas like labor markets, public procurement, access to water and internet for businesses, and competition, and integrates environmental and social considerations, including labor and women rights, consumer protection, and environmental sustainability. This broader perspective allows for a more comprehensive understanding of economic dynamics and the interactions between firms of all sizes, while also providing valuable insights into the welfare dimension of the business climate. It is further enhanced by B-READY’s three-dimensional framework, which systematically examines the legal framework, the quality of the associated public services, and their effectiveness in practice for each area analyzed. Such approach recognizes that there can be significant departures between the ‘de jure’ (rules) and the ‘de facto’ (actual implementation) which need to be factored in when assessing countries’ business climate. Another value addition comes from the fact that B-READY combines data collected through 21 new questionnaires (compared to 11 in the previous model) with pre-existing firm-level surveys, such as the Enterprise Survey. It analyzes approximately 1,200 indicators and sub-indicators. B-READY prioritizes transparency, rigor, and scalability. All data and methodologies are publicly available, fostering broad ownership of the results and enabling in-depth analyses. The methodology is designed to be scalable, with regular updates incorporating feedback and evolving best practices. This commitment to transparency and continuous improvement ensures that B-READY remains a robust and relevant tool for assessing and improving business climates globally. cross-cutting dimensions such as environmental sus- average for both Upper and Lower Middle-Income tainability, gender equality, and the impact of the Economies. These overall scores reflect the signif- digital transformation. Rolling out over a three-year icant progress Morocco has made in improving its period, B-READY will progressively expand its geo- business climate. Nonetheless, a detailed review of graphic coverage, assessing 50 economies in 2024, the sub-indices provides a more nuanced interpreta- 108 in 2025, and 174 in 2026. By providing disag- tion, revealing significant strengths alongside weak- gregated and transparent data, the program helps nesses that could be useful in identifying key priority identify country-specific strengths and weaknesses, reforms moving forward. offering a solid basis for targeted reforms. Morocco demonstrates notable strengths in several key topics covered by the B-Ready. Notably, Morocco outperforms upper middle income Morocco in the 2024 B-Ready Report countries’ average on business entry and business location, where Morocco outperforms even high- Morocco, included in the first cohort of countries income economies, reflecting the progress achieved covered by the B-Ready initiative, has tended to by the business climate initiative over the past decade. outperform countries at a similar income level It also performs higher than high income countries in on the assessment of regulatory frameworks the topic of utility services, securing broad access to and public services, but not on operational effi- electricity, water, and the Internet. Morocco also out- ciency. The inaugural edition of B-Ready positions performs most peers on international trade, thanks to Morocco favorably, surpassing both Lower Middle- the country’s good access to international markets Income Countries (its own group) and Higher and the digitization of import/exports. Middle-Income Countries (aspirational group) in two On the other hand, when compared to of the three pillars: the regulatory framework and pub- aspirational peers, Morocco also presents some lic services. However, it performs less strongly in the weaknesses that deserve attention. The key areas operational efficiency dimension, slightly below the in which Morocco underperforms relative to other 18 MOROCCO ECONOMIC UPDATE – PRIORITIZING REFORMS TO BOOST THE BUSINESS ENVIRONMENT FIGURE 21 • Comparative results by pillar. Morocco vs. average scores by income level 80 70 60 50 40 30 20 10 0 Pillar 1: Regulatory Framework Pillar 2: Public Services Pillar 3: Operational Efficiency Morocco High income Upper middle income Lower middle income Low income Source: WB staff calculations, B-Ready. FIGURE 22 • Comparative results by topic. Morocco vs. average scores by income level Business entry 90 80 Business insolvency 70 Business location 60 50 40 Market competition 30 Utility services 20 10 0 Dispute resolution Labor Taxation Financial services International trade Morocco High income Upper middle income Lower middle income Low income Source: WB staff calculations, B-Ready. middle income and high-income countries are the tory framework and a weaker performance in terms of labor market, dispute resolution and businesses’ public services or operational efficiency. Overall, this insolvency. Importantly, the weaknesses observed for suggests that while there is room for improvement in Morocco in these topics tend to concentrate on public certain regulatory frameworks, Morocco should prior- services and operational efficiency, rather than on the itize enhancing its capacity to effectively implement regulatory framework, which tends to perform rather policies to improve the business environment. well. Although Morocco’s overall scores are close to the average for higher middle-income economies A frontier analysis to prioritize reforms on other topics, such as financial services or market competition, this result also tends to mask a diver- Comparing Morocco’s performance to that of gence between the strong performance of the regula- leading nations in the topics covered by the Morocco’s Business Climate, Insights from the B-Ready Dataset 19 FIGURE 23 • Results by topic and pillar, frontier analysis. B-Ready Scores, Distance to frontier in Standard Deviations 0 –0.5 –1.0 –1.5 –2.0 –2.5 –3.0 –3.5 –4.0 –4.5 –5 Business Business Utility Labor Financial International Taxation Dispute Market Business entry location services trade resolution competition insolvency Regulatory framework Public services Operational efficiency Source: WB staff calculations, B-Ready. Notes: (i) measures distance to the frontier (top-performing nation for each of the topics and analytical dimensions) in standard deviations of scores from all 50 countries included in the first edition of the B-ready dataset; (ii) Appendix 1 offers a more disaggregated presentation of the sub-indicators included in the themes that present the largest gap with the frontier. B-Ready dataset can serve as an effective tool significant legal protection and benefits, whereas for prioritizing reforms with the highest develop- informal workers (the ´outsiders´) face highly precar- mental potential. Rather than comparing with differ- ious conditions. This disparity is likely to exacerbate ent country averages, this section presents a frontier social inequalities and job creation, underscoring the analysis, the main results of which are provided in need for a revision of the Labor Code that has been Figure 23. It also delves into a more detailed level, announced by the authorities. identifying the sub-indicators with the largest gaps Significant gaps are also evident in the area within these broad thematic categories, which are dis- of dispute resolution, which is crucial for reducing cussed below. uncertainty for companies and boosting investor The largest distance to the frontier is confidence. The distance to the frontier is particularly observed in the regulatory framework and opera- pronounced in several sub-indicators: procedural cer- tional efficiency of labor markets. Within the regu- tainty in court litigation (regulatory framework), the latory framework, a notable imbalance emerges from organizational structure of courts, the digitization and the data: while Morocco scores highly on worker con- transparency of processes (public services), and the ditions, particularly in labor rights and termination reliability of courts and alternative dispute resolution of employment, it lags significantly in areas such as mechanisms for resolving commercial cases (opera- employment restrictions and costs, including terms tional efficiency). To enhance the performance of the of employment, minimum wage rates, and termina- judicial system, Morocco may need to: (i) accelerate tion procedures. Similarly, operational efficiency also the reform of the Civil Procedure Code; (ii) modern- shows substantial gaps concerning employment ize and digitize judicial procedures; (iii) strengthen restrictions and costs. These indicators suggest that open data and data transparency; and (iv) reinforce while Morocco’s formal workers are well-protected, the skills of magistrates and judicial officers special- firms encounter significant obstacles and costs to ized in commercial justice. hire formally. This likely contributes to the high prev- Morocco’s business insolvency framework alence of informality in the country, even within for- lags behind those of frontier economies, hin- mal firms, creating a stark “insiders-outsiders” gap. In dering the restructuring and liquidation of busi- this scenario, formal workers (the ´insiders´) enjoy nesses and thereby limiting the reallocation of 20 MOROCCO ECONOMIC UPDATE – PRIORITIZING REFORMS TO BOOST THE BUSINESS ENVIRONMENT resources to more productive uses. A robust insol- short distance to the frontier on the regulatory frame- vency framework is essential for minimizing risks to work and public services dimensions of the B-Ready creditors, preserving economic activity, and foster- Indicators. Yet, Morocco presents a large gap on oper- ing business dynamism and productivity growth. ational efficiency. This is due to the low proportion of According to the B-Ready indicators, the distance to firms that innovate or use international quality certifica- the frontier is particularly pronounced when it comes tions, which underscores the need to upscale the pub- to post-commencement standards in liquidation and lic policies that support innovation, a critical boost for reorganization (regulatory framework), the digitization productivity growth. Another gap emerges on public of public services, and the time required to resolve procurement process, given private businesses´ per- reorganization proceedings (operational efficiency). ceived difficulties when bidding for a public contract, To enhance Morocco’s insolvency system, the coun- and the delays in the awarding process. To improve try could focus on completing the legal framework of this situation, MEF could continue reviewing the legal the insolvency law, including the adoption of decrees and operational public procurement framework, and related to the qualification and fees of receivers, dig- the Competition Council could be given a greater role itizing key services for liquidating struggling compa- in ensuring that procurement processes are compet- nies, and improving the timeliness and efficiency of itive, transparent, and efficient, as is increasingly the procedures. case in other jurisdictions. While Morocco has made significant prog- Other areas where the data suggest there ress regarding financial services, some local- is room for improvement include the following: ized gaps emerge from the B-Ready indicators. The sub-indicators for financial services reveal sig- • Morocco could still improve digital public ser- nificant disparities, with some sub-indicators that are vices and transparency of information for busi- very close to the frontier coexisting with significant ness entry. This could be achieved through the gaps concentrated in a few specific areas, including operationalization of the digital platform dedicated the use of movable assets to secure loans (of par- to the online creation of companies, coupled with ticular relevance for SMEs), and the development of the implementation of the electronic register of e-payment systems. Some of the actions that could be beneficial owners and the integration of gendered adopted to close these gaps include regulatory adjust- data in the business creation barometer. ments to expand the types of movable assets, debts, • Regarding business location, some gaps and obligations that can be used as collateral, while emerge on the digitization of public services, envi- raising awareness about the benefits of the National ronmental services and access to land. Access to Electronic Registry of Personal Property Collateral to information on real estate transactions and land improve its utilization and impact. Developing elec- disputes should be facilitated by increased digiti- tronic payment systems could also be prioritized, with zation of processes and enhanced interoperability a focus on reducing costs to encourage widespread between relevant services. The systematic publi- adoption. Additionally, improving data collection and cation of statistics and tariff schedules would pro- sharing by credit bureaus is vital for increasing trans- vide greater legal certainty and facilitate access to parency and efficiency in the financial market. land, a key lever for business development and the Recent reforms have closed the gap with attractiveness of private investment. Furthermore, frontier economies in terms of market competition, the optimization of administrative processes and but Morocco still lags behind on certain aspects the reduction of delays, through better coordina- of innovation and public procurement. The recent tion of the various administrations involved, are reform of the legal framework on price freedom and essential to improve operational efficiency and competition, along with the reform of the Competition simplify the procedures related to the acquisi- Council operationalized in 2022, has aligned Morocco tion and management of land. Optimizing building with international legal standards, as evidenced by the energy standards and regulating health risks asso- Morocco’s Business Climate, Insights from the B-Ready Dataset 21 ciated with construction materials are also possi- petitiveness. The Business Ready underscores the ble areas for improvement. immense economic potential of digitizing public ser- • While Morocco excels on the operational effi- vices, while also revealing uneven and fragmented ciency of utility services, some lags emerge adoption across countries and industries. Morocco’s regarding the regulatory framework, the gover- performance in that dimension shows that while nance and transparency of electricity, water and some progress has been achieved in certain areas internet provision. To continue improving the of digitalization, significant gaps remain. To attract quality of services, Morocco could thus focus on more investment and strengthen its competitiveness, strengthening coordination and efficiency in infra- Morocco must accelerate its digital transformation by structure management, fostering greater synergy developing robust infrastructure, implementing com- between the various stakeholders, accelerating prehensive and user-friendly online services, and the digitization of administrative procedures, and improving interoperability and data transparency. optimizing performance indicators. These measures are crucial for modernizing the econ- • Despite Morocco’s overall good access to markets, omy, simplifying administrative procedures, reducing international trade infrastructure at border cross- costs and delays, and fostering sustainable and inclu- ings with equipment adapted to the needs of eco- sive growth. nomic operators could be reinforced. Establishing The B-Ready report suggests the pres- mutual recognition agreements for Authorized ence of a gap between Morocco stated environ- Economic Operator programs, both domestically mental ambitions and the reality on the ground. and with major trading partners, would help facil- Several indicators suggests that the implementa- itate trade and enhance the country’s compet- tion, monitoring and operational efficiency of existing itiveness. Finally, special attention needs to be environmental regulations remain uneven. To bridge paid to promoting digital cross-border trade, fur- this gap, Morocco must promote sustainable prac- ther encouraging firms to exploit the opportunities tices, enhance transparency, and integrate environ- offered by digital transformation to increase their mental considerations into all business procedures. presence in international markets. Digitalizing environmental public services, incentiviz- • Morocco’s scoring in taxation has been some- ing green innovation and construction, and strength- what penalized by the weakness of environmental ening enforcement mechanisms are crucial steps. fiscal instruments, the perceived time and func- Additionally, developing environmental fiscal instru- tionality of processes (time to fill and pay taxes, use ments and incorporating environmental criteria in of electronic systems to file, and time to review a public procurement would be important. tax dispute), and on the financial burden that taxes Morocco’s efforts to ensure gender equal- impose on firms. Improving communications with ity in the business environment are commendable taxpayers and continuing to simplify procedures but requires further improvements. The B-Ready would help to close these gaps. The introduction suggests that the lack of gender-disaggregated data of a carbon tax, as foreseen by the ongoing tax is a significant barrier to accurately assessing the sit- reform, would reinforce Morocco´s environmental uation and designing effective policies. To address fiscal policies. this, Morocco could strengthen its gender policies, improve the collection and analysis of gender-disag- gregated data, and ensure equitable participation and Cross-cutting themes: Digital access to economic opportunities for women across transformation, environmental all sectors. Prioritizing specific support mechanisms sustainability and gender for women entrepreneurs, better integrating gender considerations into public services, and ensuring fair Morocco must embrace digital transformation access to public procurement could be important to enhance its business environment and com- steps in that direction. 22 MOROCCO ECONOMIC UPDATE – PRIORITIZING REFORMS TO BOOST THE BUSINESS ENVIRONMENT APPENDIX 1: B-READY SUB-INDICATORS, FRONTIER ANALYSIS LABOR B-Ready Scores, Distance to frontier in Standard Deviations 0 –0.5 –1.0 –1.5 –2.0 –2.5 –3.0 –3.5 –4.0 –4.5 Labor Minimum Termination Term Minimum Termination Social Obstacles to Dismissal On-the-Job Labor Health and Rights Wage of of Wage of Contribution Hiring Time and Training Disputes Safety Attributes Employment Employment Rate Employment Cost Inspection Workers’ Conditions Employment Restrictions and Costs Employment Restrictions and Costs Employment Services Quality of Labor Regulations Operational Efficiency of Labor Regulations and Public Services in Practice 23 DISPUTE RESOLUTION B-Ready Scores, Distance to frontier in Standard Deviations 0 –0.5 –1.0 –1.5 –2.0 –2.5 –3.0 –3.5 –4.0 –4.5 Procedural Judicial Legal Legal Organizational Digitalization Transparency Public Public Reliability of Operational Reliability of Operational Certainty Integrity Safeguards in Safeguards Structure of Court of Courts Services for Services for Courts Efficiency Alternative Efficiency of Arbitration in Mediation ofCourts Processes Arbitration Mediation of Court Dispute Arbitration Processes Resolution Processes Court Litigation Alternative Dispute Court Litigation Alternative Dispute Court Litigation Alternative Dispute Resolution Resolution Resolution Quality of Regulations for Dispute Resolution Public Services for Dispute Resolution Ease of Resolving a Commercial Dispute BUSINESS INSOLVENCY B-Ready Scores, Distance to frontier in Standard Deviations 0 –0.5 –1.0 –1.5 –2.0 –2.5 –3.0 –3.5 –4.0 –4.5 Pre-Commencement and Commencement Standards Post-Commencement Standards Treatment and Protection Creditor's Rights Selection and Dismissal of the Insolvency Administrator Specialized Proceedings for MSEs Cross-Border Insolvency Electronic Services Electronic Case Management Systems Digital Services Connectivity with External Systems Interconnection Public Information Public Registry of Practitioners Specialization of Courts Insolvency Administrator's Expertise Time Cost Time Cost of Debtor’s Assets Legal and Debtor's Assets and Specialized Digital Services Interoperability in Public Information Public Officials and Liquidation Reorganization Procedural Creditor's Participation in Insolvency (e-Courts) in Insolvency on Insolvency Insolvency Proceedings Proceedings Standards in Insolvency Proceedings Proceedings and Insolvency Proceedings Proceedings and Administrator Insolvency International Proceedings Registry of Proceedings Insolvency Insolvency Practitioners Quality of Regulations for Judicial Insolvency Proceedings Quality of Institutional and Operational Infrastructure Operational Efficiency of Resolving for Judicial Insolvency Proceedings Judicial Insolvency Proceedings 24 MOROCCO ECONOMIC UPDATE – PRIORITIZING REFORMS TO BOOST THE BUSINESS ENVIRONMENT –4.0 –3.5 –3.0 –2.5 –2.0 –1.5 –1.0 –0.5 –4.5 Antitrust 0 Merger Control State-Owned Enterprises Framework Competition and Scope of Competition Law Enforcement of MARKET COMPETITION Competition Regulations Strength of Intellectual Property Rights Protection Licensing and Technology Transfer Fair Access to Innovation (includes environment) Innovation and Technology Transfer Pillar I: Quality of Regulations that Promote Market Competition B-Ready Scores, Distance to frontier in Standard Deviations University-Industry Collaboration Access and Firm's Participation includes gender) Best Value for Money (includes gender and environment) Fairness of the Procurement Process Transparency of Key Bidding for Public Contracts Procurement Documents Institutional Framework Authority Advocacy and Transparency Competition Digitalization of Procurement Procedures (includes environment) Pillar II: Public Services that Promote Market Competition Transparency of Key Procurement Documents (includes gender) Simplified Merger Review Proportion of Highly Innovative Firms E-Procurement Compe- Inno- tition vation Time to Award Public Contracts Firms' Perceptions on the Ease of Bidding Promoting Market Competition Public Procurement Gender Gap in Government Suppliers Pillar III: Implementation of Key Services Appendix 1: B-ready sub-indicators, frontier analysis 25 MOROCCO ECONOMIC UPDATE – PRIORITIZING REFORMS TO BOOST THE BUSINESS ENVIRONMENT 26 –7.00 –6.00 –5.00 –4.00 –3.00 –2.00 –1.00 –8.00 0.00 Tax Guides and Their Delivery Channels TAXATION Regulations Clarity of Tax Binding Rulings and Post-Compliance Procedures Obtaining Feedback and Broad Public Consultation Regulations Practice on Preparing and Publishing Future Tax Plans Changes in Tax Transparency of Simplified Record Keeping and Reporting and Reporting Tax Record Tax Transparency in the Tax Registration Process tion Simplified General Keeping Registra- VAT Refund B-Ready Scores, Distance to frontier in Standard Deviations Refund Pillar I: Quality of Regulations on Taxation of Presence of Environmental Fiscal Instruments Fiscal ments Instru- mental Availability of Public Consultations tions Environ- Consulta- Transition Periods Portal Online Service Taxpayer Portal of Public Periods Service Tax Pre-Filled Declarations tions Taxpayer Declara- VAT Existence Availability Transition Online Pre-Filled Tax Registration Process tion Tax Tax Deregistration Tax tration Registra- Deregis- Data Cross-Checking to Verify Tax Declarations and Usage Availability of Sex-Disaggregated Data and Their Analysis Data Exchange (includes gender) Annual Performance Gender Annual Administration Diversity in Tax Gender Composition of the Staff In Tax Administration Performance and Public Accountability ability Public Account- Existence of Annual National Tax Audit Plan Tax Audits The Monitoring of Taxpayer Audits Pillar II: Public Services Provided by the Tax Administration Total Time for Preparation, Filing, Payment Taxes The percentage of Firms Filing and Paying Taxes Electronically Taxes to File and Pay Tax Total Time Needed to Complete the Audit File Electronic of a Audit Time to Review a Tax Dispute of a Tax Obtaining a VAT Refund in Practice VAT Effective Tax Rate (ETR) for Profit Taxes Profit Taxes Pillar III: Practice Efficiency Operational Effective Tax Rate (ETR) for Employment Taxes and Social Contributions tions ment Social Employ- Tax Rate Tax Rate and Pay Systems Generic Dispute Refund (ETR) for (ETR) for Contribu- Time to Use of Duration Duration Use of a Effective Effective of Tax Systems in Taxes and SELECTED RECENT WORLD BANK PUBLICATIONS ON MOROCCO Strengthening Institutional Trust in Morocco Through Public Policy November 2023 Maghreb Technical Note/Number 9 Morocco Country Climate and Development Report October 2022 CCDR Trends and Determinants of Female Labor Force Participation in Morocco: An Initial Exploratory Analysis March 2021 Policy Research Working Paper Female Labor Force Participation in Morocco: Constraints and Policy Actions November 2023 World Bank Report Tracking Economic Activity in Response to the COVID-19 Crisis Using Nighttime Lights — The Case of February 2021 Policy Research Working Paper Morocco Morocco’s Jobs Landscape March 2021 Publication Once NEET, Always NEET? A Synthetic Panel Approach to Analyze the Moroccan Labor Market May 2020 Policy Research Working Paper Morocco Economic Update – Spring 2020 April 2020 Brief Water Scarcity in Morocco: Analysis of Key Water Challenges Jan. 2020 Report Morocco - Supporting the Design of Performance-Based Contracts to Improve Results in Education Dec. 2019 Brief Polarization and Its Discontents: Morocco before and after the Arab Spring Oct. 2019 Policy Research Working Paper Doing Business 2020: Comparing Business Regulation in 190 Economies - Economy Profile of Morocco Oct. 2019 Doing Business Morocco Economic Update – Fall 2019 Oct. 2019 Brief The Moroccan New Keynesian Phillips Curve: A Structural Econometric Analysis Sept. 2019 Policy Research Working Paper Lessons from Power Sector Reforms: The Case of Morocco August 2019 Policy Research Working Paper Leveraging Urbanization to Promote a New Growth Model While Reducing Territorial Disparities in June 2019 Publication Morocco: Urban and Regional Development Policy Note Morocco: Systematic Country Diagnostic (‫ةيبرعلا‬, English, French) June 2019 SCD Creating Markets in Morocco a Second Generation of Reforms: Boosting Private Sector Growth, Job June 2019 CPSD Creation and Skills Upgrading Morocco's Growth and Employment Prospects: Public Policies to Avoid the Middle-Income Trap March 2019 Policy Research Working Paper 27 SUMMARY OF SPECIAL FOCUSES FROM THE LATEST MOROCCO ECONOMIC UPDATES Summer 2024 MEU: “Unlocking the constraints facing the private sector would help over- potential of the private sector to come the disappointing job creation capacity that the spur growth and job creation “ Moroccan economy has exhibited in recent years. The Summer 2024 MEU provided an in-depth analysis of the evolving dynamics of the Moroccan Fall 2023 MEU: “From resilience to private sector. It is based on the results of an analy- shared prosperity “ sis jointly conducted with the Moroccan Observatory of Small and Medium Enterprises (OMTPME) which The Special Focus of the ‘’Fall 2023’’ MEU exploits a comprehensive database on formal firms. analyzes the roots of Morocco’s high rates of The productivity performance of the private sec- female inactivity from a comparative perspec- tor has been lackluster, primarily due to a wors- tive. Morocco’s low and declining FLFP constitutes ening of allocative efficiency. Larger firms tend to a major missed opportunity and constraint to boost- exhibit a lower productivity than their smaller peers, ing potential output and growth. World Bank simula- suggesting that markets are not sufficiently reward- tions show that meeting the New Development Model ing more efficient and innovative firms. In addition, objectives of a 45 percent FLFP rate could increase Moroccan SMEs struggle to grow, and the density of growth by almost 1 percentage point per year, may High Growth Firms remains very low. This is problem- reduce inequality by between 1 and 2 Gini points. In atic feature of the private sector given that in other addition, increasing women’s economic agency will settings such firms have been shown to dispropor- have wider knock-on effects such as increased invest- tionately contribute to job creation. Addressing the ment in human capital for today’s children. 29 1818 H Street, NW Washington, DC 20433