MOROCCO ECONOMIC MONITOR From resilience to shared prosperity Fall 2023 Morocco Economic Update From resilience to shared prosperity Fall 2023 Maroc Rapport économiq Middle East and North Africa Region Créer un © 2023 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. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the privileges and immuni- ties of The World Bank, all of which are specifically reserved. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Cover photos used with the permission of Sean Pavone/ShutterStock.com (top), AzA HaJJ/ShutterStock.com (left center), Hoel/World Bank (Moroccan flag), and Luisa Puccini/ShutterStock.com (bottom). Publication design and layout by The Word Express, Inc. TABLE OF CONTENTS List of Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .vii Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Résumé analytique . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi ‫ ملخص تنفيذي‬. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv 1.  Recent Economic Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Morocco’s high Atlas region is hit by a powerful earthquake . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Economic growth has accelerated on the back of a partial agricultural recovery, the rebound of tourism, and net exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Macroeconomic policy remains overall supportive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Recent shocks have tested the external resilience of the Moroccan economy . . . . . . . . . . . . . . . . . . . . . . . . . 8 But Morocco has not yet overcome the welfare impacts of recent shocks, and the earthquake highlights the presence of poverty clusters that have not benefited from the broad transformations undergone by the Moroccan economy in past decades . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.  Outlook and Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 Risks to the macroeconomic outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 3. Women’s Economic Empowerment and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 International evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Female labor force participation in Morocco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 The potential economic dividends of increasing FLFP in Morocco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Policies for the economic empowerment of women . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Appendix 1: Determinants of the Female Probability of Being Active . . . . . . . . . . . . . . . . . . . . . 31 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Selected Recent World Bank Publications on Morocco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Summary of Special Focuses from the Latest Morocco Economic Updates . . . . . . . . . . . . . . . . . . 39 iii List of Figures Figure 1 Agriculture, services and net exports are sustaining the recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Figure 2 Percentage of Morocco’s area by class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Figure 3 Precipitations and cereal production in million quintals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Figure 4 Average share of territory under dry conditions, past agricultural campaigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Figure 5 investment continues to lag behind pre-pandemic levels. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Figure 6 A decline in energy prices has eased inflationary pressures… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Figure 7 …but food inflation has fallen less than in other countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Figure 8 The policy rate remains negative in real terms… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Figure 9 …and the monetary policy tightening has been comparatively mild . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Figure 10 Tomato prices in domestic markets (ASAAR database, distinguishing periods) . . . . . . . . . . . . . . . 7 Figure 11 Public spending is on the rise… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 contributing to a higher budget deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Figure 12 … Figure 13 The dirham remains well anchored… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Figure 14 …official reserves remain adequate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Figure 15 Sovereign spreads are comparatively low . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 Figure 16 The trade and current account deficits have narrowed and are largely financed with FDI . . . . . . 10 Figure 17 Gross FDI inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Figure 18 Composition of FDI inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Figure 19 Labor markets have not yet recovered from recent shocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Figure 20 The earthquake struck comparatively poor communities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Figure 21 Participation of the three most affected provinces over national total (percentage), as proxies for their economic weight prices in domestic markets (ASAAR database, distinguishing periods) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Figure 22 Contribution to potential growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Figure 23 Comparison with peers (2011–21) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Figure 24 Labor force participation rate in MENA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Figure 25 Macro and socio-economic indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Figure 26 FLFP by area of residence (2001–2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Figure 27 The effect of an increase in women employment on inequality, poverty and vulnerability; percentage points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 List of Tables Table 1 Morocco, selected economic indicators, FY19–FY26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 Table 2 Estimation results (average marginal effects): determinants of the female probability of being active (probit model) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 List of Boxes Box 1 Monitoring Morocco’s drought with satellite imagery data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Box 2 Recent measures to address food inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Box 3 Trends in Foreign Direct Investment (FDI) inflows towards Morocco . . . . . . . . . . . . . . . . . . . . . . . . 10 Box 4 Preliminary assessment of the macroeconomic impacts of the Al Haouz earthquake . . . . . . . . . 16 Box 5 Morocco’s potential growth in comparative perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Box 6 Female labor force participation in Saudi Arabia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 iv MOROCCO ECONOMIC UPDATE – FROM RESILIENCE TO SHARED PROSPERITY LIST OF ACRONYMS ARA Assessing Reserve Adequacy GDP Gross Domestic Product BAM Bank-Al-Maghrib GFDRR Global Facility for Disaster Reduction CBAM Carbon Border Adjustment mechanism and Recovery CPC Climate Prediction Center GoM Government of Morocco CPI Consumer Price Index HCP High Commission of Planning DEC World Bank’s Development Economics IMF International Monetary Fund department MENA Middle East and North Africa ECB European Central Bank MMI Modified Mercalli Index EMBI Emerging Market Bond Index MTI Macro Trade and Investment EMDEs Emergent markets and Developing NOAA National Oceanic and Atmospheric Countries Administration FAOSAT Food and Agriculture Organization OECD Organization for Economic Co-operation Corporate Statistical and Development FCL Flexible Credit Line POV Poverty FDI Foreign Direct Investment RWI Relative Wealth Index FLFP Female Labor Force Participation SME Small and Medium Enterprises) FSEC Fonds de Solidarité Contre les SOE State-Owned Enterprise Evènements Catastrophiques SPI Standard Precipitation Index FTA Free-Trade agreement UK United Kingdom GBV Gender Based Violence WB World Bank v ACKNOWLEDGEMENTS T he Morocco Economic Monitor is a semiannual The authors are grateful to Jesko Hentschel report from the World Bank economic team on (Country Director for the Maghreb), Eric Le Borgne recent economic developments and economic (Practice Manager, MTI), and Abdoulaye Sy (Lead policies. This report presents our current outlook for Country Economist) for invaluable comments during Morocco. Its coverage ranges from the macroecon- the review of this report as well as senior staff from the omy, financial stability and private sector development, IMF, Ministry of Finance, Bank al Maghrib and HCP. to human development. It is intended for a wide audi- Special thanks to Ekaterina Georgieva Stefanova ence, including policy makers, business leaders, finan- (Senior Program Assistant, MTI) for her administra- cial market participants, and the community of analysts tive support. The team also expresses its gratitude and professionals engaged in Morocco. to the Moroccan SME Observatory (Observatoire The Morocco Economic Monitor is a product of Marocain de la TPME) for sharing aggregate data the Middle East and North Africa (MENA) unit in the and indicators that were used in various sections of Macroeconomics, Trade & Investment (MTI) Global the report. The findings, interpretations, and conclu- Practice of the World Bank Group. The report was pre- sions expressed in this Monitor are those of World pared by Javier Diaz-Cassou (Senior Economist, MTI), Bank staff and do not necessarily reflect the views of Federica Marzo (Senior Economist, POV), Amina Iraqi the Executive Board of the World Bank or the govern- (Economist, MTI), with contributions from Remi Trier ments they represent. (Senior Water Resources Management Specialist, For information about the World Bank and its SMNAG), Nabila Gourroum (Senior Agriculture activities in Morocco, please visit www.worldbank.org/ Specialist, SMNAG), Majda Benzidia (Consultant, POV), en/country/morocco(English), www.worldbank.org/ Kersten Kevin Stamm (Economist, DECPG), Benny ar/country/morocco(Arabic), or www.banquemondi- Istanto (Consultant, DESC), Adrian Cavia (Consultant, ale.org/fr/country/morocco (French). For questions MNCMA), Robert Andrew Maty (Research Analyst, and comments on the content of this publication, DIME4), Rashmin Gunasekera (Senior Disaster Risk please contact Javier Diaz Cassou (jdiazcassou@ Management Specialist, GFDRR), and Antonio worldbank.org). Pomonis (Consultant, GFDRR). vii EXECUTIVE SUMMARY T he Moroccan economy is recovering. The September Al Haouz earthquake had Following a sharp deceleration in 2022 devastating human and material consequences caused by various overlapping commod- localized primarily in remote mountain communi- ity and climatic shocks, economic growth increased ties but is unlikely to have major macroeconomic to 2.9 percent in the first semester of 2023, driven impacts. Close to 3 thousand lives have been lost, primarily by services and net exports. Inflation has 60 thousand buildings destroyed, including more halved between February and August 2023, but food than 500 schools located for the most part in the inflation remains high. Lower commodity prices have rural provinces of Al Haouz, Chichoua and Taroudant, also contributed to a temporary narrowing of the cur- while major urban centers have been largely spared. rent account deficit. The response to recent crises Although this disaster will unavoidably disrupt local and the unfolding reform of the health and social economic activities and livelihoods, the earthquake protection systems are exerting pressures on public will have limited impacts at the macro level, as the spending. However, the government is managing to most affected areas account for a small share of gradually reduce the budget deficit. Morocco’s GDP. The government has responded Growth is expected to further firm-up in to the disaster with financial assistance to affected the medium term. After expanding by 2.8 percent in households and an ambitious new development plan 2023, real GDP growth is projected to reach 3.1 per- for the High Atlas provinces, which has the potential cent in 2024, 3.3 percent in 2025 and 3.5 percent in to stimulate more inclusive growth in the medium and 2026, as domestic demand gradually recovers from the long-term. Depending on how it is financed, the recent shocks. The recent improvement in the current implementation of that plan could exert additional account deficit is expected to revert as energy prices pressure on public finances. bounce back and a more dynamic domestic demand Showcasing Morocco´s external resilience, feeds imports. The budget deficit is projected to con- the country has managed to effectively respond to tinue its gradual decline and reach 3.6 percent of recent shocks. The Al Haouz earthquake of September GDP in 2025, contingent on the continued successful 8th is the last of a series of shocks that have struck implementation of tax reform and on the reform of the Morocco since the COVID-19 pandemic. The authori- system of price subsidies. This would allow for a sta- ties have demonstrated a strong capacity to cope with bilization of Morocco´s debt ratio. these disturbances, another example of which has Executive summary ix been the humanitarian response to the seism and the challenge and have launched ambitious reforms to ambitious development plan put forward by the author- improve human capital and incentivize private invest- ities to unlock the development potential of the most ments. However, these reforms may fail to yield the affected provinces. Other signs of Morocco´s external desired economic take-off unless other critical micro- resilience are: the solid (and growing) external demand constraints to growth are relieved. Morocco still needs for the country´s goods and services despite the slow- to deepen reforms aimed at removing the regulatory ing of the international economy; the strength of FDI and institutional obstacles that limit competition and inflows, increasingly directed towards the manufactur- slow the reallocation of production factors towards ing sector, suggesting that Morocco may be benefiting more productive firms and sectors. Moreover, evalu- from the ongoing near-shoring process; the emer- ating the policies and reforms under implementation gence of various modern industrial niches well con- will be key to ensure that they yield the desired out- nected to global value chains, partly fueled by strategic come, for which a greater access to data is necessary, investments such as the construction of the Tangier- an unfinished agenda in Morocco. Med port; and the sovereign´s maintained access to Increasing Female Labor Force Participa- international capital markets despite the ongoing tight- tion (FLFP) would have a strong economic and ening of global financial conditions. social dividend. International evidence shows that But the domestic welfare impacts of these gender equality is not only a matter of social justice shocks remain pronounced. Households´ confi- and human rights, but also a powerful driver of socio- dence indicators continue to deteriorate and have economic development. In this context, Morocco’s reached an all-time low, with 87.3 percent of surveyed low and declining FLFP constitutes a major missed individuals declaring in the second quarter of 2023 opportunity and constraint to potential output and that their quality of life has deteriorated over the past growth. World Bank simulations show that meeting year. Per capita GDP has not yet returned to pre-pan- the New Development Model objectives of a 45 per- demic levels and final consumption expenditure per cent FLFP rate could increase growth by almost 1 per- capita is roughly where it was in 2019. Aggregate sta- centage point per year, may reduce inequality by tistics mask the fact that food inflation is dispropor- between 1 and 2 Gini points. In addition, increasing tionately affecting the poor and vulnerable. A large women’s economic agency will have wider knock-on proportion of women and the youth remain excluded effects such as increased investment in human capi- from labor markets, with declines in activity rates. tal for today’s children. Jobs continue to be lost in rural areas as agricultural Although several ambitious reforms have activities suffer from the multi-year drought that began already been undertaken, a paradigm shift is in 2019. The Al Haouz earthquake has also raised still needed to economically empower Moroccan awareness about the pockets of poverty that persist women. This effort needs to address the specific con- in rural areas, many of which have barely participated straints faced by women in different contexts. In rural in the profound economic transformations undergone areas, these include solving mobility problems and elsewhere in Morocco over the past two decades. increasing financial and digital inclusion to enable Additional reforms are needed to capitalize women to engage in productive activities outside the on Morocco´s external resiliency and boost pros- household. In urban areas, where wage work is more perity. The potential growth rate of the Moroccan common, promoting gender-friendly conditions in the economy has significantly declined since the 2000s, workplace is of the essence. Cross-cutting constraints and is currently estimated at 3.6 percent, below the also need to be addressed, including the supply of average for emerging market and development econ- economic opportunities, the need for an enabling omies. The materialization of such a growth rate over environment for women to take up these opportuni- coming years would be clearly insufficient to achieve ties, including via further legal reforms, the provision the ambitious objectives set by the New Development of acceptable and affordable childcare options, and Model. The Moroccan authorities are aware of the shifting traditional social norms. x MOROCCO ECONOMIC UPDATE – FROM RESILIENCE TO SHARED PROSPERITY RÉSUMÉ ANALYTIQUE L ’économie marocaine se redresse. Suite à avec succès. Cela permettrait de stabiliser le taux un ralentissement marqué en 2022, dû à divers d’endettement du Maroc. chocs climatiques et sur les matières pre- Le récent tremblement de terre d’Al Haouz mières survenus de manière concomitante, la crois- en septembre dernier a eu des conséquences sance économique a repris son élan, atteignant 2,9 humaines et matérielles dévastatrices, localisées % au cours du premier semestre 2023 principale- principalement dans les communautés monta- ment grâce aux services et aux exportations nettes. gneuses isolées, mais il est peu probable qu’il L’inflation a baissé de moitié entre février et août 2023, ait des impacts macroéconomiques majeurs. mais l’inflation alimentaire reste élevée. La baisse des Près de 3 000 personnes ont perdu la vie, 60 000 prix des matières premières a également contribué à bâtiments ont été détruit, dont plus de 500 écoles une réduction temporaire du déficit du compte cou- situées pour la plupart dans les provinces rurales rant. La réponse aux crises récentes et la réforme en d’Al Haouz, Chichaoua et Taroudant, tandis que les cours des systèmes de santé et de protection sociale grands centres urbains ont été largement épargnés. exercent des pressions sur les dépenses publiques. Bien que cette catastrophe perturbe inévitablement Cependant, le gouvernement parvient à réduire pro- les activités économiques locales et les moyens de gressivement le déficit budgétaire. substance, ses effets au niveau macro seront limi- La croissance devrait continuer à se raffer- tés car les zones les plus touchées ne représentent mir à moyen terme. Après avoir augmenté de 2,8 % qu’une part modeste du PIB du Maroc. En réponse en 2023, la croissance du PIB réel devrait atteindre à la catastrophe, le gouvernement a fourni une assis- 3,1 % en 2024, 3,3 % en 2025 et 3,5 % en 2026, la tance financière aux ménages affectés et a mis en demande intérieure se remettant progressivement place un nouveau plan de développement ambitieux des chocs récents. L’amélioration récente du déficit pour les provinces du Haut Atlas, visant à favoriser du compte courant devrait s’inverser à mesure que une croissance plus inclusive à moyen et long terme. les prix de l’énergie rebondissent et qu’une demande En fonction de son mode de financement, la mise en intérieure plus dynamique alimente les importations. œuvre de ce plan pourrait exercer une pression sup- Le déficit budgétaire devrait continuer à diminuer pro- plémentaire sur les finances publiques. gressivement et atteindre 3,6 % du PIB en 2025, à Illustrant la résilience externe du Maroc, le condition que la réforme fiscale et celle de la Caisse pays a réussi à répondre de manière efficace aux de Compensation continuent d’être mises en œuvre chocs récents. Le séisme d’Al Haouz du 8 septembre xi est le dernier d’une série de chocs qui a frappé le Des réformes supplémentaires sont néces- Maroc depuis la pandémie de COVID19. Les autori- saires pour tirer parti de la résilience extérieure tés ont fait preuve d’une forte capacité à faire face à du Maroc et stimuler la prospérité. Le taux de crois- ces perturbations, comme en témoignent la réponse sance potentiel de l’économie marocaine a considé- humanitaire apportée au séisme et le plan de déve- rablement diminué depuis les années 2000 et est loppement ambitieux proposé par les autorités pour actuellement estimé à 3,6 %, soit en dessous de la libérer le potentiel de développement des provinces moyenne des marchés émergents et des économies les plus affectées. On peut également noter d’autres en développement. La concrétisation d’un tel taux de indicateurs illustrant la résilience extérieure du Maroc croissance dans les années à venir serait nettement notamment: une demande extérieure robuste (et crois- insuffisante pour atteindre les objectifs ambitieux sante) pour les biens et services du pays malgré le fixés par le Nouveau Modèle de Développement. Les ralentissement de l’économie mondiale; la vigueur autorités marocaines sont conscientes de ce défi et des flux d’IDE, de plus en plus orientés vers le secteur ont lancé des réformes ambitieuses pour améliorer manufacturier, suggérant que le Maroc pourrait tirer le capital humain et inciter les investissements privés. parti du processus actuel de délocalisation; l’émer- Cependant, ces réformes risquent de ne pas produire gence de diverses niches industrielles modernes le décollage économique souhaité tant que d’autres étroitement liées aux chaînes de valeur mondiales, contraintes microéconomiques cruciales à la crois- en partie alimentées par des investissements straté- sance ne sont pas résolues. Le Maroc doit encore giques tels que la construction du port de Tanger-Med; approfondir les réformes visant à éliminer les obs- et le maintien de l’accès de l’État aux marchés finan- tacles réglementaires et institutionnels entravant la ciers internationaux malgré le resserrement actuel des concurrence, tout en ralentissant la réallocation des conditions financières mondiales. facteurs de production vers des entreprises et des Mais l’impact de ces chocs sur le bie- secteurs plus productifs. Par ailleurs, l’évaluation des nêtre intérieur reste prononcé. Les indicateurs de politiques et des réformes en cours de mise en œuvre confiance des ménages continuent de se dégrader et sera essentielle pour s’assurer qu’elles produisent les ont atteint un niveau historiquement bas, avec 87,3 % résultats escomptés, nécessitant un accès étendu des personnes interrogées ont déclaré au deuxième aux données, un aspect en cours en cours d’élabo- trimestre 2023 que leur qualité de vie s’est détério- ration au Maroc. rée au cours de l’année précédente. Le PIB par L’augmentation de la participation des habitant n’a pas encore retrouvé ses niveaux prépan- femmes au marché du travail (PFMT) aurait des démie et les dépenses de consommation finale par retombées économiques et sociales impor- habitant se situent à peu près au même niveau qu’en tantes. Les données internationales montrent que 2019. Ces statistiques globales qui dissimulent le fait l’égalité des genres n’est pas seulement une question que l’inflation alimentaire frappe de manière dispro- de justice sociale et de droits humains, mais aussi portionnée les personnes pauvres et les personnes un puissant moteur de développement socio-éco- vulnérables. Une grande partie des femmes et des nomique. Dans ce contexte, la faiblesse et le déclin jeunes reste exclue du marché du travail, avec des du taux d’activité des femmes au Maroc constituent baisses des taux d’activité. Les pertes d’emploi se une occasion manquée significative et un obstacle à poursuivent dans les zones rurales, les activités agri- l’augmentation de la production et de la croissance coles souffrent de la sécheresse pluriannuelle qui a potentielle. Les simulations de la Banque mondiale débuté en 2019. Le tremblement de terre d’Al Haouz indiquent que la réalisation des objectifs du Nouveau a également mis en lumière des poches de pauvreté Modèle de Développement avec un taux d’activité persistantes dans les zones rurales, dont bon nombre des femmes de 45 %, pourrait accroître la croissance ont peu bénéficié des profondes transformations éco- de près d’un point de pourcentage par an, et réduire nomiques observées ailleurs au Maroc au cours des les inégalités de 1 à 2 points de Gini. De plus, l’auto- deux dernières décennies. nomisation économique des femmes aurait des effets xii MOROCCO ECONOMIC UPDATE – FROM RESILIENCE TO SHARED PROSPERITY d’entraînement plus larges, tels que l’augmentation mettre aux femmes de se lancer dans des activités pro- des investissements dans le capital humain pour les ductives en dehors du foyer. Dans les zones urbaines, enfants d’aujourd’hui. où le travail salarié est plus répandu, il est essentiel Bien que plusieurs réformes ambitieuses de promouvoir des conditions de travail favorables aux aient déjà été entreprises, un changement de para- femmes. Des contraintes transversales doivent égale- digme est encore nécessaire pour renforcer l’auto- ment être prise en compte, notamment en améliorant nomisation économique des femmes marocaines. l’offre d’opportunités économiques, en créant un envi- Cet effort doit cibler les contraintes spécifiques aux- ronnement propice permettant aux femmes de saisir quelles sont confrontées les femmes dans différents ces opportunités, particulièrement par le biais de nou- contextes. Dans les zones rurales, Cela implique velles réformes juridiques, fournissant des options de notamment de résoudre les problèmes de mobilité et garde d’enfants acceptables et abordables, et en trans- d’accroître l’inclusion financière et numérique pour per- formant les normes sociales traditionnelles. Résumé analytique xiii ‫ملخص تنفيذي‬ ‫املحيل للمغرب‪ .‬وقد استجابت الحكومة للكارثة بتقديم املساعدات‬ ‫املالية لألرس املترضرة‪ ،‬إضافة إىل خطة تنمية جديدة طموحة ملقاطعات‬ ‫األطلس الكبري‪ ،‬والتي لديها القدرة عىل تحفيز منو أكرث شموال عىل املدى‬ ‫القتصاد املغريب يتعاىف‪ .‬وبعد التباطؤ الحاد يف عام ‪ 2022‬الناجم عن‬ ‫مختلف الصدمات السلعية واملناخية املتداخلة‪ ،‬ارتفع النمو االقتصادي‬ ‫إىل ‪ % 2.9‬يف النصف األول من عام ‪ ،2023‬مدفوعا بشكل أسايس‬ ‫ا‬ ‫املتوسط والطويل‪ .‬واعتامدا ً عىل كيفية متويلها‪ ،‬فإن تنفيذ هذه الخطة‬ ‫بالخدمات وصايف الصادرات‪ .‬وانخفض التضخم مبقدار النصف بني‬ ‫ميكن أن يفرض ضغوطاً إضافية عىل املالية العامة‪.‬‬ ‫فرباير‪ /‬شباط وأغسطس‪ /‬آب ‪ ،2023‬لكن تضخم أسعار املواد الغذائية‬ ‫متكنت البالد من االستجابة بفعالية للصدمات األخرية‪ ،‬مام‬ ‫ال يزال مرتفعا‪ .‬كام ساهم انخفاض أسعار السلع األساسية يف تضييق‬ ‫يدل عىل الصمود الخارجي للمغرب‪ .‬فزلزال الحوز الذي وقع يوم ‪8‬‬ ‫مؤقت لعجز الحساب الجاري‪ .‬وتؤدي االستجابة لألزمات األخرية‪،‬‬ ‫سبتمرب‪/‬أيلول هو األخري يف سلسلة من الصدمات التي رضبت املغرب‬ ‫واإلصالحات الجارية يف أنظمة الصحة والحامية االجتامعية إىل فرض‬ ‫منذ جائحة كوفيد ‪ ،19‬وقد أظهرت السلطات قدرة ملحوظة عىل‬ ‫ضغوطات عىل النفقات العامة‪ .‬ومع ذلك‪ ،‬متكنت الحكومة من خفض‬ ‫التعامل مع هذه االضطرابات‪ ،‬كام هو واضح من خالل االستجابة‬ ‫عجز املوازنة تدريجياً‪.‬‬ ‫اإلنسانية للزلزال‪ ،‬وخطة التنمية الطموحة التي طرحتها السلطات‬ ‫ومن املتوقع أن يتعزز النمو عىل املدى املتوسط‪ .‬وبعد التوسع‬ ‫إلطالق إمكانات التنمية يف املقاطعات األكرث ترضرا ً‪ .‬ومن العالمات‬ ‫بنسبة ‪ % 2.8‬يف عام ‪ ،2023‬من املتوقع أن يصل منو إجاميل الناتج املحيل‬ ‫األخرى التي تشري عىل صمود املغرب الخارجي‪ :‬الطلب الخارجي القوي‬ ‫الحقيقي إىل ‪ % 3.1‬يف عام ‪ ،2024‬و‪ % 3.3‬يف عام ‪ ،2025‬و‪ % 3.5‬يف‬ ‫(واملتزايد ) عىل سلع وخدمات البالد عىل الرغم من تباطؤ االقتصاد‬ ‫عام ‪ ،2026‬مع تعايف الطلب املحيل تدريجياً من الصدمات األخرية‪ .‬ومن‬ ‫الدويل؛ وقوة تدفقات االستثامر األجنبي املبارش‪ ،‬املوجهة بشكل متزايد‬ ‫املتوقع أن ينعكس التحسن األخري يف عجز الحساب الجاري‪ ،‬مع انتعاش‬ ‫نحو قطاع الصناعات التحويلية‪ ،‬مام يشري إىل أن املغرب قد يستفيد‬ ‫أسعار الطاقة‪ ،‬وتزايد الطلب املحيل الدينامييك الذي يغذي الواردات‪.‬‬ ‫من عملية التوطني القريب الحالية؛ وظهور مختلف املجاالت الصناعية‬ ‫ومن املتوقع أن يواصل عجز املوازنة تراجعه التدريجي ليصل إىل ‪% 3.6‬‬ ‫الحديثة املرتبطة بشكل جيد بسالسل القيمة العاملية‪ ،‬والتي تغذيها‬ ‫من إجاميل الناتج املحيل يف عام ‪ ،2025‬وهو األمر املرتبط مبواصلة التنفيذ‬ ‫جزئيا االستثامرات االسرتاتيجية؛ مثل بناء ميناء طنجة املتوسط‪ ،‬وحفاظ‬ ‫الناجح لإلصالح الرضيبي‪ ،‬وإصالح نظام دعم األسعار‪ .‬وهذا من شأنه أن‬ ‫الدولة عىل إمكانية الوصول إىل أسواق رأس املال الدولية‪ ،‬عىل الرغم من‬ ‫يسمح باستقرار نسبة الدين يف املغرب‪.‬‬ ‫التشديد املستمر لألوضاع املالية العاملية‪.‬‬ ‫كان لزلزال الحوز يف سبتمرب‪/‬أيلول عواقب إنسانية ومادية‬ ‫لكن تأثريات هذه الصدمات عىل الرفاهية املحلية تظل واضحة‪.‬‬ ‫مدمرة تركزت بشكل أسايس يف املجتمعات الجبلية املعزولة‪ ،‬ولكن من‬ ‫تستمر مؤرشات ثقة األرس يف التدهور‪ ،‬ووصلت إىل أدىن مستوياتها عىل‬ ‫غري املرجح أن يكون له آثار كبرية عىل االقتصاد الكيل‪ .‬وقد فقد ما‬ ‫اإلطالق‪ ،‬حيث أعلن ‪ % 87.3‬من األفراد الذين شملهم االستطالع يف‬ ‫مر ‪ 60‬ألف مبنى‪ ،‬مبا يف ذلك‬ ‫يقرب من ‪ 3‬آالف شخص أرواحهم‪ ،‬و ُ‬ ‫د ِّ‬ ‫الربع الثاين من عام ‪ ،2023‬أن نوعية حياتهم قد تدهورت خالل العام‬ ‫أكرث من ‪ 500‬مدرسة يقع معظمها يف األقاليم الريفية الحوز‪ ،‬شيشاوة‬ ‫املايض‪ .‬ومل يعد نصيب الفرد من إجاميل الناتج املحيل بعد إىل مستويات‬ ‫وتارودانت‪ ،‬يف حني نجت املراكز الحرضية الكربى إىل حد كبري‪ .‬وعىل‬ ‫ما قبل الجائحة‪ ،‬كام أن نصيب الفرد من اإلنفاق االستهاليك النهايئ هو‬ ‫الرغم من أن هذه الكارثة ستؤدي حتام إىل تعطيل األنشطة االقتصادية‪،‬‬ ‫تقريبا ما كان عليه يف عام ‪ ،2019‬وتخفي اإلحصاءات اإلجاملية حقيقة‬ ‫وسبل العيش املحلية‪ ،‬إال أن الزلزال سيكون له آثار محدودة عىل املستوى‬ ‫أن تضخم أسعار الغذاء يؤثر بشكل غري متناسب عىل الفقراء والفئات‬ ‫الكيل‪ ،‬حيث أن املناطق األكرث ترضرا متثل حصة صغرية من إجاميل الناتج‬ ‫‪xv‬‬ ‫إن زيادة مشاركة املرأة يف سوق العمل سيكون لها فوائد‬ ‫األكرث احتياجا‪ .‬وال تزال نسبة كبرية من النساء والشباب مستبعدة من‬ ‫اقتصادية واجتامعية كبرية‪ .‬وتظهر األدلة الدولية أن املساواة بني الجنسني‬ ‫أسواق العمل‪ ،‬مع انخفاض معدالت النشاط‪ .‬وال يزال فقدان الوظائف‬ ‫ليست مجرد مسألة تتعلق بالعدالة االجتامعية وحقوق اإلنسان‪ ،‬ولكنها‬ ‫يف املناطق الريفية‪ ،‬حيث تعاين األنشطة الزراعية من الجفاف‪ ،‬الذي دام‬ ‫أيضا محرك قوي للتنمية االجتامعية واالقتصادية‪ .‬ويف هذا السياق‪ ،‬يشكل‬ ‫عدة سنوات‪ ،‬والذي بدأ يف عام ‪ .2019‬كام أدى زلزال الحوز إىل زيادة‬ ‫ضعف وتراجع معدل مشاركة املرأة يف سوق العمل يف املغرب فرصة كبرية‬ ‫الوعي حول جيوب الفقر التي ال تزال قامئة يف املناطق الريفية‪ ،‬والتي مل‬ ‫ضائعة وعائقاً أمام تعزيز النمو والناتج املحتمل‪ .‬وتظهر عمليات املحاكاة‬ ‫يشارك الكثري منها بالكاد يف التحوالت االقتصادية العميقة التي شهدتها‬ ‫التي أجراها البنك الدويل‪ ،‬أن تحقيق أهداف منوذج التنمية الجديد‬ ‫مناطق أخرى يف املغرب خالل العقدين املاضيني‪.‬‬ ‫املتمثلة يف مشاركة املرأة يف سوق العمل بنسبة ‪ % 45‬ميكن أن يزيد‬ ‫هناك حاجة إىل إصالحات إضافية لالستفادة من الصمود‬ ‫النمو بنحو نقطة مئوية واحدة سنويا‪ ،‬وقد يقلل من عدم املساواة مبقدار‬ ‫الخارجي للمغرب وتعزيز الرخاء‪ .‬وقد انخفض معدل النمو املحتمل‬ ‫نقطة إىل نقطتني حسب مؤرش جيني (‪ .)Gini‬وباإلضافة إىل ذلك‪ ،‬فإن‬ ‫لالقتصاد املغريب بشكل ملحوظ منذ العقد األول من القرن الحادي‬ ‫زيادة التمكني االقتصادي للمرأة سيكون له تأثريات جانبية أوسع نطاقا‪،‬‬ ‫والعرشين‪ ،‬ويقدر حاليا بنسبة ‪ ،% 3.6‬أي أقل من املتوسط يف اقتصادات‬ ‫مثل زيادة االستثامر يف رأس املال البرشي عىل أطفال اليوم‪.‬‬ ‫األسواق الناشئة واالقتصادات النامية‪ .‬ومن الواضح أن تحقيق معدل‬ ‫وعىل الرغم من أن العديد من اإلصالحات الطموحة قد تم‬ ‫النمو هذا عىل مدى السنوات املقبلة لن يكون كافيا لتحقيق األهداف‬ ‫تنفيذها بالفعل‪ ،‬إال أنه ال تزال هناك حاجة إىل نقلة نوعية لتمكني املرأة‬ ‫الطموحة التي حددها منوذج التنمية الجديد‪ .‬وتدرك السلطات املغربية‬ ‫املغربية اقتصاديا‪ .‬ويجب أن يركز هذا الجهد عىل قيود محددة تواجهها‬ ‫حجم التحدي‪ ،‬وقد أطلقت إصالحات طموحة لتحسني رأس املال البرشي‪،‬‬ ‫النساء يف سياقات مختلفة‪ .‬ويشمل ذلك يف املناطق الريفية حل مشاكل‬ ‫وتحفيز االستثامرات الخاصة‪ .‬ومع ذلك‪ ،‬قد تفشل هذه اإلصالحات يف‬ ‫التنقل‪ ،‬وزيادة الشمول املايل والرقمي لتمكني املرأة من املشاركة يف‬ ‫تحقيق االنطالقة االقتصادية املرجوة‪ ،‬ما مل يتم تخفيف القيود الجزئية‬ ‫أنشطة إنتاجية خارج األرسة‪ .‬أما يف املناطق الحرضية‪ ،‬حيث العمل مقابل‬ ‫الحاسمة األخرى أمام النمو‪ .‬وال يزال املغرب بحاجة إىل تعميق اإلصالحات‬ ‫األجر أكرث انتشارا‪ ،‬فمن الرضوري تعزيز ظروف العمل املالمئة للنوع‪.‬‬ ‫الرامية إىل إزالة العقبات التنظيمية واملؤسسية‪ ،‬والتي تحد من املنافسة‪،‬‬ ‫ويجب أيضً ا معالجة القيود الشاملة‪ ،‬مبا يف ذلك توفري الفرص االقتصادية‪،‬‬ ‫وتبطئ إعادة تخصيص عوامل اإلنتاج نحو الرشكات والقطاعات األكرث‬ ‫والحاجة إىل بيئة متكينية للمرأة الغتنام هذه الفرص‪ ،‬وال سيام من خالل‬ ‫إنتاجية‪ .‬عالوة عىل ذلك‪ ،‬فإن تقييم السياسات واإلصالحات قيد التنفيذ‬ ‫املزيد من اإلصالحات القانونية‪ ،‬وتوفري خيارات مقبولة وبأسعار معقولة‬ ‫سيكون أساسيا لضامن تحقيق النتائج املرجوة‪ ،‬والتي تتطلب الوصول إىل‬ ‫لرعاية األطفال‪ ،‬وتغيري األعراف االجتامعية التقليدية‪.‬‬ ‫البيانات‪ ،‬وهو مجال غري مكتمل يف املغرب‪.‬‬ ‫‪xvi‬‬ ‫‪MOROCCO ECONOMIC UPDATE – FROM RESILIENCE TO SHARED PROSPERITY‬‬ 1 RECENT ECONOMIC DEVELOPMENTS Morocco’s high Atlas region is hit by ages and of the needs of affected population and a powerful earthquake regions. Since then, it has disclosed a new vision for the region, which combines immediate financial sup- A devastating earthquake struck the high Atlas on port to affected households with an ambitious devel- September 8th, claiming close to three thousand opment plan for the provinces of the high Atlas. This lives. The epicenter of this 7 magnitude earthquake constitutes another indication of Morocco’s resilience was located 70 km southeast of Marrakech, with against shocks, which has been repeatedly put to the human and material losses concentrated in the prov- test in recent years. However, the disaster also serves inces of Al-Haouz, Taroudant, and Chichaoua, and to as a reminder of the pockets of poverty that are still a lesser extent in Marrakech, Ouarzazate and Azilal. present in many rural areas, communities that have so The government estimates that close to 60 thousand far ripped limited benefits from the growth and mod- buildings have been totally or partially destroyed, ernization of the Moroccan economy over the past mostly in remote and impoverished mountainous vil- two decades. This chapter exploits the limited statis- lages, affecting at least 300,000 people (Source: tical information that is available to characterize the Interior Ministry). Despite the heavy impacts suffered socio-economic conditions of the affected popula- in some structures of the old Medina, conditions nor- tions, while chapter 2 provides a preliminary analysis malized relatively fast in the city of Marrakech, while of potential macroeconomic impacts. impacts were overall modest in other major urban centers. The government and civil society response Economic growth has accelerated to the earthquake has been overall effective. The on the back of a partial agricultural basic needs of most population were covered within recovery, the rebound of tourism, days of the disaster, including medical care, the dis- and net exports tribution of food and water, and of temporary shelter for affected households. The government also under- After a weak 2022, the Moroccan economy has took immediately an impact assessment of dam- gained dynamism in 2023. Last year was marked 1 FIGURE 1 • Agriculture, services and net exports are sustaining the recovery Contribution to real GDP growth (Percentage change, year-on-year, seasonally adjusted) 20 20 10 10 0 0 –10 –10 –20 –20 Q1-2019 Q2-2019 Q3-2019 Q4-2019 Q1-2020 Q2-2020 Q3-2020 Q4-2020 Q1-2021 Q2-2021 Q3-2021 Q4-2021 Q1-2022 Q2-2022 Q3-2022 Q4-2022 Q1-2023 Q2-2023 Q1-2019 Q2-2019 Q3-2019 Q4-2019 Q1-2020 Q2-2020 Q3-2020 Q4-2020 Q1-2021 Q2-2021 Q3-2021 Q4-2021 Q1-2022 Q2-2022 Q3-2022 Q4-2022 Q1-2023 Q2–2023 Primary sector Secondary sector Net exports Tertiary sector Real GDP Priv.consumption and investment Source: HCP and world bank staff calculations. by various mutually reinforcing shocks, with a severe impacts on an agricultural sector that still represents drought leading to a collapse of domestic agricultural 10–12 percent of GDP and employs close to 30 per- production, compounded by surging international cent of the labor force. commodity prices, all of which triggered inflationary A rebound in tourism is also contributing pressures long unseen in Morocco. In this context, to lift growth. Before the earthquake, the Moroccan partly due to a base effect, real GDP growth dropped economy was fully capitalizing on the tourism boom from 8 percent in 2021 to 1.3 percent in 2022, a com- that is taking place globally. Indeed, the sector’s sta- paratively large deceleration. As these shocks begin tistics have been impressive during the first semes- to dissipate, growth has recovered to 2.9 percent in ter: the number of international arrivals increased by the first semester of 2023. 92.3 percent from last year (from 3.4 to 6.5 million) The partial recovery of agricultural produc- and has already surpassed pre-COVID levels by more tion contributes to explain this acceleration, but than 20 percent; the number of hotel overnight stays Morocco continues to face unusually dry condi- increased by 86 percent (+134 percent for non-resi- tions and key crops remain at risk. A succession dents); travel receipts have increased by 69 percent, of adverse climate shocks has resulted in abrupt fluc- reaching almost 7 percent of GDP. This is boosting the tuations in the country’s agricultural output in recent services sector, which posted a 4.9 percent growth years, with major impacts on overall GDP growth. In rate in the first Semester of 2023 and has consistently 2022, the production of cereals collapsed from 103 been the main contributor to Morocco’s growth on the to 34 million quintals, and the resulting contraction of supply side since the country begun recovering from agricultural GDP (–12.9 percent on an annual basis) the pandemic crisis (Figure 1). By contrast, despite explains almost a third of the economic decelera- the continued success of certain industrial niches tion undergone that year. By contrast, due to a low such as automobiles and aeronautics, the second- base effect and to improved precipitations during ary sector contracted by 1.7 percent in 2022 and by a the fall and winter months, agricultural value-added further 2.1 percent y-o-y in the first semester of 2023, expanded by 6.6 percent year-on-year (y/y) in the pulled by a construction slowdown that can be partly first semester of 2023, making a substantial contri- attributed to cost inflation and to an environment of bution to the ongoing economic recovery. However, higher interest rates. Morocco has not yet overcome what has become one On the demand side, net exports have of the worst and longest droughts in its recent his- become the main contributor to growth. Recent tory (see Box 1), which could continue to have major shocks seem to have shifted the key drivers of 2 MOROCCO ECONOMIC UPDATE – FROM RESILIENCE TO SHARED PROSPERITY BOX 1: MONITORING MOROCCO’S DROUGHT WITH SATELLITE IMAGERY DATA The Standard Precipitation Index (SPI) is an indicator that is widely used to monitor the evolution of droughts based on satellite imagery. In this box, we utilize the 6-month SPI, which, at each point of the time series, compares the deviation of precipitation levels in the preceding six months with the average for corresponding 6-month intervals throughout the entire available historical period. This is done using a gridded satellite images dataset that captures conditions throughout the Moroccan territory from January 1981 to May 2023. Depending on the value of the SPI, each observation (grid cell and month) is assigned to one of eleven categories, from extremely dry to extremely moist. The main summary indicator that we use below is the share of Morocco’s territory that falls into each of these categories. This indicator helps identify the various multi-year droughts undergone over past decades, such as that of the 1980s or that of the late 90s and early 00s (Figure 2). It also shows that the extended drought that began in 2019 is comparable to those episodes, with precipitations that have consistently remained well below historical averages since then across a substantial portion of Morocco’s territory, with only a few short-lived respites. Rainfall remains a crucial determinant of agricultural output in Morocco, as illustrated by the strong positive correlation between the proportion of the territory under comparatively moist conditions and cereal production (Figure 3). However, it is not the only one: the evolution of temperatures and the repartition of rainfall throughout the agricultural campaign can also have important impacts on yields. This is why some outliers can be found in the data series, such as the 2020–21 agricultural campaign, which was overall dry, but had relatively frequent precipitations of low intensity well distributed over time, explaining why that year’s crop was above average. The share of Morocco’s territory under dry conditions declined from 85 percent on average during the 2021–22 agricultural campaign to 64 percent in the 2022–23 campaign (Figure 4), which has contributed to the ongoing agricultural recovery. However, when comparing that indicator with its average over the entire historical period (39 percent) it emerges that Morocco has not yet overcome the drought that commenced in 2019, which is continuing to affect certain crops. Moreover, the extended length of the drought implies that irrigated agriculture, which in normal times is protected from short-term fluctuations in rainfall, is threatened as well. Indeed, despite the moderate decrease in the severity of the drought that the SPI index evidences, the filling level of Moroccan dams has increased by just 1.3 percentage points over the past year and remained at an alarmingly low 25.5 percent in early October, against more than 63 percent in late 2019, at the early stages of the current drought. In this context, water continues to be severely rationed for irrigation purposes in Morocco. FIGURE 2 • Percentage of Morocco’s area by class (6-month SPI) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% May-82 Apr-83 Mar-84 Feb-85 Jan-86 Dec-86 Nov-87 Oct-88 Sep-89 Aug-90 Jul-91 Jun-92 May-93 Apr-94 Mar-95 Feb-96 Jan-97 Dec-97 Nov-98 Oct-99 Sep-00 Aug-01 Jul-02 Jun-03 May-04 Apr-05 Mar-06 Feb-07 Jan-08 Dec-08 Nov-09 Oct-10 Sep-11 Aug-12 Jul-13 Jun-14 May-15 Apr-16 Mar-17 Feb-18 Jan-19 Dec-19 Nov-20 Oct-21 Sep-22 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). (continued on next page) Recent Economic Developments 3 BOX 1: MONITORING MOROCCO’S DROUGHT WITH SATELLITE IMAGERY DATA (continued) Precipitations and cereal FIGURE 3 •  Average share of territory under FIGURE 4 •  production in million quintalsa dry conditions, past agricultural campaignsb 100% 140 90% 90% 120 80% 80% 70% 100 70% 60% 60% 80 50% 50% 40% 60 40% 30% 40 30% 20% 20% 20 10% 10% 0% 0 0% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2012–13 2013–14 2014–15 2015–16 2016–17 2017–18 2018–19 2019–20 2020–21 2021–22 2022–23 Average share of territory under moist conditions during agricultural campaign Dry Severely dry Cereal production (million quintals) rhs Source: World Bank staff using data from FAOSTAT and National Oceanic and Source: World Bank staff using data from FAOSTAT and National Oceanic and Atmospheric Administration’s (NOAA) Climate Prediction Center (CPC). Atmospheric Administration’s (NOAA) Climate Prediction Center (CPC). b Dry conditions groups five categories: abnormally, moderately, severely, extremely, a Moist conditions groups five categories of the 11 captured in Figure 4: abnormally, and exceptionally dry. Severely dry groups the three drier categories (severely, moderately, very, extremely, and exceptionally moist. extremely, and exceptionally dry). Morocco’s post-COVID growth dynamics (Figure 1, FIGURE 5 • Investment continues to lag behind right-hand panel). While the immediate recovery that pre-pandemic levels began in late 2020 was primarily driven by the pull Gap with pre-pandemic level of domestic demand, the contributions of private (Percentage) consumption and investment to overall GDP growth Net exports turned negative in 2022, a turnaround that can be Investment Demand partly attributed to the inflationary shock (see below). Pub. cons Almost symmetrically, net exports’ contribution to Priv. cons Services growth turned positive in early 2022 and has been the Supply Manufacturing main driver of the acceleration undergone in the first Agriculture quarter of 2023. This was at first due to the dynamism GDP of exports, and more recently also to a reduction in –20 0 20 40 60 imports as the 2022 terms of trade shock dissipated H1-2023 vs. H1-2019 2022 vs. 2019 during the first semester of the year. Private investment has yet to return to pre- Source: HCP and world bank staff calculations. pandemic levels. Recent shocks are having long- lasting impacts on the structure of the Moroccan economy, as evidenced by the contrasting gap of pandemic levels by a substantial margin, private con- the various components of supply and demand with sumption has barely recovered, and total investment 2019 levels (Figure 5). On the demand side, while net still falls short of 2019, which is entirely attributable to exports and public consumption already surpass pre- private capital formation (by 6.2 percent when com- 4 MOROCCO ECONOMIC UPDATE – FROM RESILIENCE TO SHARED PROSPERITY A decline in energy prices has eased FIGURE 6 •  FIGURE 7 • …but food inflation has fallen less inflationary pressures… than in other countries Headline and core inflation Headline and food inflation (percentage change, year-on-year) (Percentage point change (y-o-y), latest vs. 12 months ago) 25 80 4 20 60 2 15 40 0 10 20 –2 5 0 –4 –6 0 –20 –8 –5 –40 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 –10 Saudi Arabia Tunisia Kuwait Qatar Oman Bahrain Morocco Algeria EU Jordan USA Food Headline inflation Core inflation (ISJ-HCP) Tranport Fuels and (rhs) lubricants (rhs) Headline Food Source: World Bank staff calculations, HCP, BKAM, Haver Analytics. Source: World Bank staff calculations, HCP, BKAM, Haver Analytics. paring 2022 with 2019, by 15 percent when compar- in February to 4.6 percent in September), suggest- ing the first semester of 2023 with the first semester of ing that easing price pressures are becoming more 2019).1 This is a worrisome development given that a broad-based. The recent evolution of Morocco’s head- decline in private investment is likely to not only affect line inflation is broadly aligned with global trends. current growth but also future growth, which could However, it is worth noting that the decline in food be one of the scars inherited from the multiple crises inflation observed over the past twelve months seems undergone since 2020. Trends are somewhat less to be less pronounced than in other countries, which pronounced on the supply side, but the participation is probably due to adverse climatic conditions’ impact of services is increasing, while the weight of the man- on domestic supply (Figure 7). ufacturing sector has stagnated and that of agricul- With inflation on a downward trajectory, ture has been markedly volatile due to climate shocks. the central bank has decided to pause the mon- etary policy tightening cycle. After three consecu- tive policy rate hikes for a cumulative 150 basis points Macroeconomic policy remains between September 2022 and March 2023, at its overall supportive June and September quarterly meetings, BAM’s mon- etary policy council decided to keep interest rates Price pressures have begun to ease. Headline unchanged at 3 percent. The policy rate remains inflation has declined from a peak of 10.1 percent in negative in real terms and is well below its neutral February 2023 to 4.9 percent in September (Figure 6). level, as estimated by the IMF (Figure 8).2 In fact, the Price pressures have moderated for most catego- ries of goods and services included in the CPI, but the decline in inflation has been primarily driven by 1 HCP does not disaggregate between private and public the slowdown in the prices of volatile food products, investment in national account statistics. However, given fuels and lubricants. In turn, this was mostly due to that public investment has increased between 2019 and 2023, the decline in total investment can only be attribut- the evolution of international energy prices, which in able to the private sector. August had dropped by 37 percent y/y according to 2 Based on an IMF’s recent estimate, Morocco’s neu- the World Bank’s commodity price index. Core infla- tral real interest rate is between 0.9 and 4 percent tion is also on a downward trend (from 8.5 percent (Queyranne et al., 2021). Recent Economic Developments 5 FIGURE 8 • The policy rate remains negative in …and the monetary policy tightening FIGURE 9 •  real terms… has been comparatively mild Real policy rate Increase in policy rate/inlfation (August 2023, percent) (percent) 10 12 16 5 14 10 12 0 8 10 –5 6 8 –10 6 4 –15 4 2 –20 2 Kuwait Jordan Egypt Algeria Morocco Tunisia Federal Reserve ECB UK 0 0 Egypt Jordan Federal Reserve UK ECB Kuwait Tunisia Morocco Algeria Ex ante Ex post Cumulative increase in policy rate (since February 2022) Source: BKAM and World Bank staff calculations. Average inflation in 2022 (rhs) a ex ante interest rate calculated with latest annual inflation rate available for each country. Ex post interest rate is calculated with projected year-end inflation for 2023. Source: BKAM and World Bank staff calculations. cumulative increase in interest rates that has taken temporarily restrict tomato exports in February amid place since the beginning of the tightening cycle is surging import demand from Europe, a decision that significantly smaller in Morocco than in most other had a significant impact on containing prices during advanced economies and in many EMDEs (Figure 9). the highly sensitive month of Ramadan, but which BAM’s cautious approach could be justified by the could discourage domestic production or compro- fact that inflation has been driven almost exclusively mise Morocco’s future presence in export markets by a series of supply shocks, as opposed to most (Box 2).4 To absorb part of the cost increases under- advanced economies, where a resilient demand and gone by the sector, emergency programs for cat- tight labor markets have also exerted significant pres- tle food (barley) and additional subsidies for seeds sures on prices. Two-year inflation expectations have and fertilizers have also been approved. Finally, also begun to decline (3.9 percent in the third quarter the authorities have reinforced controls over abu- of 2023, against 4.7 percent in 2023Q3), but are still sive market practices that distort prices while tak- above historical averages and also surpass the nom- ing action to increase transparency. There is room inal policy rate.3 to continue improving the efficiency of food supply The authorities are increasingly resorting chains to further moderate prices (Box 2). Another to non-monetary measures to confront food infla- public policy to contain food inflation has been the tion. Despite the ongoing easing of price pressures, public support provided to road transport operators food inflation remains stubbornly high at 9.9 percent and the maintenance of electricity tariffs, aimed at in September. As discussed in the previous edition avoiding the diffusion of higher energy prices to the of the MEU, food represents a higher portion of vul- broader economy. nerable households’ consumption basket, implying that the inflationary shock is likely to be having a dis- proportionate impact at the bottom of the income 3 Source: Bank al Maghrib, Monetary Policy Report (vari- distribution. The government has adopted various ous editions). measures to boost domestic supply as part of its 4 New restrictions have been recently announced for other anti-inflationary strategy. For instance, it began to products, such as olives and onions. 6 MOROCCO ECONOMIC UPDATE – FROM RESILIENCE TO SHARED PROSPERITY BOX 2: RECENT MEASURES TO ADDRESS FOOD INFLATION As in many other countries, food inflation has understandably become a major source of concern in Morocco. This was the case particularly during the weeks that preceded the holy month of Ramadan, when price increases peaked at 20 percent y/y. Complementing other anti-inflationary measures such as the monetary policy tightening or the maintenance of key subsidies and regulated prices, Morocco’s measures to cope with food inflation can be broadly grouped in three areas: trade measures; inputs’ subsidization; support to supply chains. Trade measures. Morocco’s emergence as a major exporter of fruits and vegetables has brought important benefits to the agricultural sector and to the broader economy. However, it has also blurred the segmentation between domestic and international markets, increasing the exposure of domestic prices to disturbances originating from abroad. The recent volatility exhibited by the price of tomatoes provides a good illustration of the forces at play (Figure 10). According to FAO-STAT, as access to European markets was progressively expanded, the proportion of tomatoes that Morocco exports increased from 10–20 percent of total production in the early 00s to almost 50 percent in the 2020s. In this context, out-of-the-ordinary inflationary spikes in export markets can be quickly transmitted to the domestic market. This was the case last winter, as surging energy prices led to sharp disruptions in Europe’s heated greenhouse production of tomatoes and other vegetables, which quickly exerted pressures on Morocco’s domestic prices. FIGURE 10 • Tomato prices in domestic markets (ASAAR database, distinguishing periods) Prices of tomato (price/kg) 14 Restrictions of exports to West Africa Export ban from 12 (February 9, 2023) (March 18–22, 2023) 10 8 6 4 2 0 01-Dec-22 15-Dec-22 29-Dec-22 12-Jan-23 26-Jan-23 09-Feb-23 23-Feb-23 09-Mar-23 23-Mar-23 06-Apr-23 20-Apr-23 04-May-23 18-May-23 01-Jun-23 15-Jun-23 29-Jun-23 13-Jul-23 27-Jul-23 Minimum price/kg Maximum price/kg Source: ASAAR database (Ministry of Agriculture). The government initially responded to this shock with quantitative restrictions on exports that were in place since late February, which were intensified prior to the beginning of Ramadan. These measures were followed by a reduction in domestic prices, which offered some respite to consumers. However, this impact was short-lived. It could eventually turn negative if the uncertainty originated by export restrictions induces producers to downscale cropping plans, which would adversely impact consumers. It could also have eroded importers’ confidence on Morocco’s reliability as a trading partner, which could affect future exports, although the most recent export statistics published by the authorities suggest that this risk is not materializing. It is worth noting that new export restrictions have been recently adopted for olives and onions. Inputs’ subsidization. In line with the measures launched in early 2022 to cope with the drought and its potential impact on the agricultural sector, the government has approved in June new subsidies aimed at reducing the cost of key inputs, including barley, imported cattle food, seeds and fertilizers. The objective of these subsidies is to mitigate the impact that recent shocks could have on the country’s animal and vegetal capital stock, and to relieve pressures from domestic prices. However, such programs are expensive: the subsidies announced in June alone will mobilize MAD 9 billion or 0.6 percent of GDP. Moreover, part of these subsidies will be inevitably leaked to export markets and will therefore not benefit domestic consumers. Going forward, a more effective alternative to channel support towards disadvantaged households affected by a price shock could be articulated around the new family allowances program that is about to be deployed, which will use the Unified Social Registry (RSU) as a targeting scheme. Support to supply chains. On top of the control measures that were announced around the Ramadan period to combat abusive market practices, the Moroccan authorities are considering other structural measures to increase the efficiency of supply chains and thus contribute to alleviate price pressures in domestic markets. These include: (i) the modernization of wholesale markets of fresh fruits and (continued on next page) Recent Economic Developments 7 BOX 2: RECENT MEASURES TO ADDRESS FOOD INFLATION (continued) vegetables to turn them into multi-service platforms including refrigerated storage, packaging, direct sales, etc. ; (ii) the gradual relaxation of the norm that currently imposes a 7 percent ad valorem tax on all transactions of fruits and vegetables, irrespective of whether they are commercialized through wholesale markets; (iii) the formalization of transactions and actors across the value chain, which would help regulate the sector and reinforce transparency on price formation; (iv) the reinforcement of norms and quality standards, limiting the current practice of mixing products with different qualities far upstream in the marketing chain, which penalizes consumers and hampers price monitoring in domestic markets (in contrast with export markets, for which strict norms are enforced). Public spending is on the rise… FIGURE 11 •  contributing to a higher budget FIGURE 12 • … deficit Total expenditures (cumulative billion MAD) Overall budget balance 400 (cumulative billion MAD) 20 300 0 –20 200 –40 100 –60 0 –80 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2021 2022 2023 2021 2022 2023 Source: MEF and World bank staff calculations. Source: MEF and World bank staff calculations. Despite an (exogenous) decline in price sub- Recent shocks have tested the sidies, public spending continues to edge upward. external resilience of the Moroccan Total subsidies have declined by 30.1 percent y/y economy during the first nine months of 2023, the mechanical effect of lower butane gas prices in international mar- Morocco continues to exhibit a remarkable kets. This windfall of approximately MAD 9.6 billion capacity to navigate through abrupt distur- has not resulted in a reduction of overall spending, bances. The recent earthquake and the terms-of- which increased by 9.6 percent between January and trade deterioration that followed Russia’s war on September (4.5 percent in real terms). This was primar- Ukraine are the last of a series of exogenous shocks ily due to a 25.4 percent increase in investment, while undergone by the Moroccan economy over the past the wage bill has slightly declined in real terms. Public four years, together with the COVID-19 pandemic, revenues are also still on the rise (+5.3 percent nomi- a major tightening of global financial conditions, nal, +0.4 percent real), despite a decline in indirect tax and a multi-year drought. Several trends evidence collection. The net impact of these trends has been the country’s external resilience in the face of such an increase of the budget deficit during the first nine shocks. Although following the widening of the fluc- months of the year. As a result, public debt increased tuation band the exchange rate has begun to play by 7.6 percent in nominal terms at end of August 2023 a shock absorption role, the dirham has remained compared to its level at the end of December 2022. relatively stable (Figure 13); foreign exchange This increase is skewed in favor of external debt reserves continue to provide a comfortable buffer (+14 percent vs. +5.5 percent for domestic debt). against external shock, and are adequate according 8 MOROCCO ECONOMIC UPDATE – FROM RESILIENCE TO SHARED PROSPERITY FIGURE 13 • The dirham remains well anchored… FIGURE 14 • …official reserves remain adequate Nominal exchange rate Reserves in months of imports 11.5 (end of period, ratio) 11.0 14 12 10.5 10 10.0 8 9.5 6 4 9.0 2 8.5 0 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22 Mar-22 May-22 Jul-22 Sep-22 Nov-22 Jan-23 Mar-23 May-23 Jul-23 Sep-23 Apr-19 Jul-19 Oc t- 19 Jan-20 Apr-20 Jul-20 Oc t- 20 Jan-21 Apr-21 Jul-21 Oct- 21 Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 Apr-23 Jul-23 MAD/$ Min band (MAD/$) Egypt Turkey Jordan Max band (MAD/$) MAD/Euro Morocco Tunisia Source: BKAM, Haver analytics and World bank staff calculations. Source: BKAM, Haver analytics and World bank staff calculations. to the ARA metric (Figure 14);5 sovereign spreads tain Morocco’s imports of goods, which contracted are comparatively low (Figure 15) and a successful by almost 2 percent. Despite a 38 percent decline sovereign bond issuance in March evidences that in the value of phosphates’ sales, mostly due to a investors have a strong appetite for Morocco’s debt;6 price effect, total merchandise exports increased the country continues to attract relatively large FDI by 1 percent during the same period, while exports inflows despite the weakness of the global economy of services increased by 38 percent owing to the (Box 3). The Flexible Credit Line approved in April rebound of international tourism. As a result, the 2023 by the IMF is another sign of the country’s trade deficit has declined by 32 percent, to about international credibility. Indeed, beyond its financial 8.9 percent of GDP in the first semester of 2023. significance as a precautionary buffer which could Together with the continued expansion of worker’s mobilize USD 5 billion in case of need over the next remittances (almost 8 percent of GDP), this has led couple of years, the FCL constitutes a powerful seal to a rapid reduction in the current account deficit, of approval that it is reserved for countries with very which even posted a small surplus in the first quar- strong policies, institutional frameworks, and eco- ter of the year. nomic fundamentals. Falling commodity prices and thriving exports of goods and services narrowed the 5 Source: IMF, Request For an Arrangement Under the trade and current account deficits during the Resilience and Sustainability Facility (September, 2023). first semester of 2023. Although Morocco is the 6 On March 2023, Morocco issued USD2.5 billion in inter- national financial markets, a first tranche of USD1.25 bil- world’s largest producer of phosphates, it remains lion with a 5-year maturity and a yield of 6.2 percent, a net commodity importer, more so when adverse and a second tranche of USD1.25 billion with a ten-year climatic conditions undermine domestic agricul- maturity and a yield of 6.6 percent. tural output, as was the case in 2022. International 7 In June 2022, the annual growth rate registered by the commodity prices peaked in mid-2022, and last World Bank’s commodity price index reached 58 per- year saw the trade (goods and services) and cur- cent (+85 percent for energy, +18 percent for food, +23 percent for energy). One year later, it was declining rent account deficits expand to 11.5 and 3.5 per- by 37 percent (–45 percent for energy, –13 percent for cent of GDP respectively. This terms-of-trade shock food, –15 percent for grains). This decrease has been dissipated in the first semester of 2023, as prices partly reverted for oil prices in recent weeks, although fell back below their pre-war level,7 helping con- wheat prices remain low. Recent Economic Developments 9 Sovereign spreads are comparatively FIGURE 15 •  FIGURE 16 • The trade and current account low deficits have narrowed and are largely financed with FDI EMBI (basis points) Current account, trade, services balance (as percentage of GDP) 1,600 15 0 1,400 10 –2.1 –3.3 –3.0 –4.6 –1 1,200 –1.7 –2.7 –6.6 5 –2.7 –2 1,000 800 0 –3 600 –5 –4 400 –10 –5 200 –15 –2.6 –1.2 –4.5 –2.3 –4.0 –3.4 –20 –4.8 –0.1 –6 0 –3.5 –1.2 26-Jan-22 26-Mar-22 26-May-22 26-Jul-22 26-Sep-22 26-Nov-22 26-Jan-23 26-Mar-23 26-May-23 26-Jul-23 26-Sep-23 –25 –7 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 JP Morgan EMBI Global Morocco Tunisia Trade in goods Trade in services Egypt Turkey Current account balance (rhs) Source: Morocco exchange office, Haver analytics, and World bank staff calculations. Source: Morocco exchange office, Haver analytics, and World bank staff calculations. BOX 3: TRENDS IN FOREIGN DIRECT INVESTMENT (FDI) INFLOWS TOWARDS MOROCCO The numerous disruptions to global supply chains that have taken place over recent years have increased the appeal of “nearshoring” for advanced economies’ transnational firms. This refers to the process of bringing previously offshore production closer to domestic markets with the purpose of shortening (and thus securing) supply chains. Morocco has various characteristics that could make it an attractive nearshoring destination, including the country’s proximity and open access to European and other markets with its vast network of FTAs, its political and macroeconomic stability, and modern infrastructures. In addition, Morocco is well-endowed with renewable energy sources, which could become another comparative advantage for attracting FDI in the context of the decarbonization effort that is taking place at the global scale, which the recent introduction of a carbon border adjustment mechanisms (CBAM) in Europe could further accelerate. This box reviews some recent statistics on FDI suggesting that Morocco may indeed be beginning to reap the benefits of this nearshoring trend. According to OECD statistics, global FDI dropped by 24 percent in 2022, from 1.8 to 1.3 percent of the World’s GDP (Figure 17). By contrast, FDI inflows to Morocco increased by 22 percent (from 2.5 to 2.9 percent of GDP) and posted a 52 percent increase since 2020. Perhaps even more remarkable is that the total scale of announced greenfield FDI projects has soared from USD3.8 billion in 2021, to USD15.3 billion in 2022 and to USD38 billion in 2023 (Source: Financial Times FDI Intelligence). Turkey and Mexico constitute two interesting comparators as nearshoring destinations, given their geographic proximity to the EU and the US and their economic ties with these markets. Against global trends, FDI inflows towards these two countries also increased in 2022. However, this increase was less pronounced than in Morocco (10 percent in Turkey and 15 percent in Mexico), and FDI inflows’ overall weight in their economy is also lower (2.6 percent of GDP in Mexico and 1.4 percent of GDP in Turkey). Another trend that suggests that Morocco could be becoming one of the destinations chosen by multinational firms wishing to shorten their supply chains is the changing composition of FDI inflows. Real estate has historically been the sector that attracted the highest volumes of FDI in Morocco (25.3 percent of total between 2014 and 2019). In recent years, however, the share of FDI inflows to the manufacturing sector has steadily increased from 24.9 percent of total between 2014 and 2019 to a peak of 37.2 percent in 2022, thus becoming the main recipient of foreign investment (Figure 18). The industrial niches that have attracted the highest volumes of FDI since 2020 are the automotive sector (37 percent of total), the chemical industry (22 percent), the food industry (10 percent) and the pharmaceutical industry (9.5 percent). European countries are by far the largest investors in Morocco, with almost 70 percent of total FDI inflows since 2020. However, the United States and the United Arab Emirates have gained weight in recent years, while Chinese investment remains relatively low. (continued on next page) 10 MOROCCO ECONOMIC UPDATE – FROM RESILIENCE TO SHARED PROSPERITY BOX 3: TRENDS IN FOREIGN DIRECT INVESTMENT (FDI) INFLOWS TOWARDS MOROCCO (continued) Gross FDI inflows (percent of GDP) FIGURE 17 •  Composition of FDI inflows FIGURE 18 •  4.5% (in percent) 120 3.0% 3.5% 100 3.0% 80 43.1 42.4 2.5% 49.1 47.4 51.5 2.0% 60 1.5% 19.7 23.2 40 25.7 22.2 20.2 1.0% 0.5% 20 37.2 30.4 28.3 34.4 25.2 0.0% 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2014–2019 2020 2021 2022 Q1-2023 Morocco World Mexico Turkey Manufacturing Real estate Others Source: OECD and Office des Changes, WB staff calculations. Source: OECD and Office des Changes, WB staff calculations. Morocco boasts various success stories in But Morocco has not yet overcome tradeable sectors. Although the overall participation the welfare impacts of recent of the Moroccan manufacturing sector in the country’s shocks, and the earthquake GDP has barely moved over recent decades, some highlights the presence of poverty industrial niches have thrived, with a combined 40 per- clusters that have not benefited from cent increase in combined automotive, aerospace and the broad transformations undergone electronics exports since 2019. Between 2012 and by the Moroccan economy in past 2022, Morocco roughly quadrupled its motor vehicle decades production, up to 465 thousand units.8 This has turned Morocco into the 23rd largest car manufacturer at the As it improve its macroeconomic resilience, the global level, the second in Africa. Illustrating the eco- key challenge for Morocco is to increase prosper- nomic significance of the sector, automobiles have sur- ity and share it more broadly. Various indicators of passed phosphates and fertilizers as Morocco’s main subjective and objective well-being suggest that the export, reaching MAD111 billion in 2022 (USD10.9 bil- economic situation of a large proportion of the pop- lion), about 8 percent of GDP (6.5 percent of GDP in ulation has stagnated or even deteriorated since the 2019).9 This is partly due to the emergence of Tangier- COVID-19 pandemic. This does not mean that exter- MED as a major logistical hub in the Mediterranean, and nal resilience has not made a difference. Indeed, the fourth best performing container port at the global the experience of many other countries shows that level.10 Indeed, more than 50 percent of Morocco’s the welfare impacts of recent domestic and external merchandise exports are already channeled through Tangier Med.11 Another Moroccan champion in the tradeable sector is the national phosphate company, 8 Source: International Organization of Motor Vehicle OCP, which has managed to increase its downstream Manufacturers. participation in the value chain, moving from mining to 9 Source: Office des Changes. the production of fertilizers, with a growing focus on the 10 Source : World Bank, Container Port Performance Index. African market. 11 Source: Tangier Med annual report, 2021. Recent Economic Developments 11 turbulences could have been much larger had the ita is roughly where it was in 2019. Although eco- country not managed to prevent these shocks from nomic growth picked up in the first half of 2023, turning into a full-blown crisis. The challenge is now to private consumption expanded by a mere 0.2 percent take advantage of Morocco’s comparative strengths, y/y, after having contracted by 0.7 percent in 2022, which include its external resilience, into a lever for which is likely to be due to the impact that high infla- development and shared prosperity. Chapters 2 and tion is still having on disposable incomes. Moreover, 3 discuss some of the policies and reforms that would these aggregate impacts hide the asymmetric con- help transition towards a more solid and inclusive sequences of recent shocks, which are substantially growth pathway. larger at the bottom of the distribution. Indeed, as dis- Household confidence indicators have cussed in the previous edition of this report, inflation is reached a historical low. The recent accelera- higher for poorer households given the larger weight tion of economic growth appears to have already of food items in their consumption basket. This implies improved business sentiment: according to the cen- that the erosion of their already low real disposable tral bank’s quarterly survey, the share of Moroccan incomes induced by inflation has been larger, which firms that consider current conditions to be adverse is likely to have pushed many households below the has dropped from 36 to 20 percent between 2022Q2 poverty and the vulnerability lines. and 2023Q3. By contrast, the household confidence A large proportion of women and young index has continued to drop in the first and second Moroccans are excluded from the labor market. quarters of 2023, reaching an all-time low since that Activity rates have shown a persistent downward indicator begun being produced by HCP in 2008. As trend since the late 2000s, dropping from 52 per- many as 87.3 percent of surveyed households con- cent in 2007 to 43.2 percent in the third quarter of sider that their quality of life has deteriorated over the 2023 (Figure 19). In addition, the COVID-19 pandemic past year, and only 53.4 percent of them declare hav- seems to have marked a turning point in unemploy- ing sufficient revenues to cover their expenses. ment, which increased from levels that oscillated Per capita income and consumption are around 10 percent prior to 2020 to 12–13 percent stagnating, especially for poorer households. If since then, and a peak of 13.5 percent in the third measured in purchasing power parity international quarter of 2023. As discussed in detail in Chapter 3, dollars, per capita GDP has not yet returned to pre- this exclusion problem is particularly pronounced for pandemic levels (–1.7 percent between 2019 and women, and Morocco has one of the lowest levels 2022), and final consumption expenditure per cap- of female labor force participation of the world. The FIGURE 19 • Labor markets have not yet recovered from recent shocks Activity and unemployment rate Employed labor force (+15 yeras) in urban and rural areas (in percent) (index 2019=100) 52 16 110 110 51 14 50 105 105 49 12 48 10 100 100 47 8 46 95 95 6 45 4 90 90 44 43 2 85 85 42 0 Q4-2007 Q3-2008 Q2-2009 Q1-2010 Q4-2010 Q3-2011 Q2-2012 Q1-2013 Q4-2013 Q3-2014 Q2-2015 Q1-2016 Q4-2016 Q3-2017 Q2-2018 Q1-2019 Q4-2019 Q3-2020 Q2-2021 Q1-2022 Q4-2022 Q3-2023 80 80 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Activity rate Unemployment rate (rhs) Urban Rural Real GDP (rhs) Source: HCP, Haver analytics and world bank staff calculations. 12 MOROCCO ECONOMIC UPDATE – FROM RESILIENCE TO SHARED PROSPERITY young also present high inactivity rates, which proba- tive data sources to characterize socioeconomic con- bly contributes to explain why as many as 47 percent ditions at the local level (Chi et al., 2022). As shown of Moroccans aged 18 to 29 still express a willingness in Figure 20, most of the communes (municipalities) to emigrate according to the latest Arab Barometer that are located near the epicenter are in the bottom survey. It should be noted, however, that this share 25 percent of the RWI distribution, and thus should be has declined substantially in recent years (it stood expected to be among the poorest in the country. This at 70 percent before the pandemic) Recent statis- is consistent with the indicators that can be derived tics also illustrate the contrasting dynamics between from HCP’s 2014 poverty map, which shows that the urban and rural labor markets, as the latter continues closer to the epicenter, the higher the incidence of to be impacted by the multi-year drought described both multidimensional and monetary poverty, well in box 1. Indeed, while the number of active occu- above regional and national averages.12 Education pied workers in rural areas has dropped by 14.4 per- indicators such as the illiteracy rate also tend to dete- cent between 2019 and the third quarter of 2023, that riorate close to the epicenter, which also present same indicator has increased by 3.2 percent in urban a higher share of women, presumably because of centers (Graph 19, right-hand panel). men’s tendency to migrate from these areas. The Al-Haouz earthquake has raised aware- Morocco has seized recent shocks as ness about the development challenges faced an opportunity to launch ambitious reforms, of by remote mountainous rural areas in Morocco. which the development plan for the High Atlas Much of the public debate following the earthquake announced by the authorities following the has been centered around the fact that the most affected areas are also among the poorest in the country, almost exclusively rural and with lower capa- 12 A more recent household survey has been conducted by HCP in 2020 but the microdata are not available bilities to cope with a disaster of this magnitude. Given to researchers so the most of to date poverty map for the scarcity of recent statistical information about Morocco dates from 2014. Given the numerous and large these remote communities, we rely on the Relative shocks (e.g., droughts, covid) a map drawn a decade Wealth Index (RWI), an indicator that exploits alterna- ago could be relatively out of date for some regions. FIGURE 20 • The earthquake struck comparatively poor communities. Relative Wealth Index map (*) Poverty 35% 33% 30% 30% 27% 24% 26% 25% 20% 21% 20% 16% 15% 15% 12.1% 12% 12% 10% 8% 8.6% 5% 0% Multidimensional poverty Global poverty rate (percent) rate (percent) 0–10km direct impact 10–30km very high risk 30–50km high risk 50–100km low risk Marrakech - Safi Souss - Massa Morocco Source: World bank staff calculations based on Chi et al. (2022) and HCP poverty maps (2014).(*) the RWI applies machine learning algorithms to vast and heterogeneous data to estimate standard of living within countries at a 2.4 km resolution. It uses data from satellites, mobile phone networks, topographic maps, and well-aggregated and de-identified connectivity data from Facebook. A lower RWI (bottom 25 percent) denotes a lower standard of living; the PGA refers to Peak Ground Acceleration and measures the maximum ground acceleration that occurred during the earthquake at a given location. Recent Economic Developments 13 earthquake is another example. Past editions of this a population of more than 4 million people. Again, the report have already discussed the reforms launched successful implementation of this plan would contrib- in the aftermath of the COVID-19 pandemic, empha- ute to reduce the persistent inter-regional equity gaps sizing that their successful implementation could that characterize Morocco, helping rural areas bene- place Morocco on a stronger and more inclusive fit from the economic modernization that has taken development path (World Bank, 2021).13 The recov- hold over the past couple of decades in other parts ery plan announced by the government constitutes of the country. As discussed in the following chapters, another example of Morocco’s capacity to turn cri- to achieve these objectives the government will need ses into opportunities. Indeed, less than three weeks to continue addressing the bottlenecks that still con- after the earthquake, the authorities had already com- strain Morocco’s ability to turn its many comparative mitted not only to provide significant financial assis- advantages into engines for economic growth and tance for a one-year period to the families that have social inclusion. been affected by the earthquake and to help rebuild houses and affected infrastructure, but also to launch a five-year plan with an envelope of USD11.7 billion 13 https://www.worldbank.org/en/country/morocco/publi- (8.3 percent of 2023 GDP) to address the root causes cation/morocco-economic-monitor-building-momentum- of the underdevelopment in six provinces which target for-reform. 14 MOROCCO ECONOMIC UPDATE – FROM RESILIENCE TO SHARED PROSPERITY 2 OUTLOOK AND RISKS Outlook 2023), together with the resources that could be made available through the Solidarity Fund against Despite the material devastation and the casu- Natural Catastrophes (FSEC) will limit short-term fis- alties that it caused, the Al Haouz earthquake cal impacts.14 is unlikely to have major short-term macroeco- The response launched by the authorities nomic consequences. The recent earthquake could increase both GDP growth and the bud- presents certain features that will limit its impact on get deficit in the medium-term. The first pillar of the economic growth: the most affected areas contribute plan (MAD 21 billion or 1.5 percent of 2023 GDP) is to a small percentage of national GDP, tend to rely focused on sustaining the livelihoods of the affected on low value-added small-scale agricultural activities, population, through cash transfers that will mitigate and are weakly integrated into the national economy the income lost by the disruption to local economic (Box 4). The most relevant risk at the macro level are activities, while financing the reconstruction of their the indirect spillovers that the earthquake may trigger homes, and through the rehabilitation of the region’s on other regions if it adversely affects tourism, a major infrastructure. The second pillar (MAD 99 billion contributor to recent GDP growth (see Chapter 1). or 6.7 percent of 2023 GDP) is more forward-look- However, the limited information available to date sug- ing and aims at realizing the growth potential of the gests that conditions have normalized quickly in the High Atlas provinces, through investments to upgrade country’s main destinations, most notably Marrakech. infrastructure, promote tourism and agriculture, reha- Moreover, the international evidence discussed in Box 4 suggests that earthquakes tend to have mod- est impacts on tourism when critical infrastructure is 14 FSEC is a public compensation mechanism with a man- date to provide partial compensation to uninsured vul- spared, as has been the case with the September 8th nerable households. It has a multi-layer financing seism. Finally, the significant volume of private and strategy, which includes an excess parametric risk trans- public donations received by the government (15 bil- fer product that was specifically designed for severe lion dirham, or 1.1 percent of GDP by early October earthquakes. 15 bilitate urban centers, and improve the quality of pub- it could also add pressure on already stretched public lic services. A reconstruction and development plan finances. Insufficient information was available at the of this magnitude could have a positive impact on time of writing on the details of the plan and its financ- growth during its implementation period (2024 to ing sources to fully incorporate it in our baseline fis- 2028) and beyond. Depending on how it is financed, cal projections. PRELIMINARY ASSESSMENT OF THE MACROECONOMIC IMPACTS OF THE AL HAOUZ BOX 4:  EARTHQUAKE The economic impacts of natural disasters are often classified into direct or indirect losses. The former refers to the destruction of property and assets caused by these events, while indirect impacts refer to resulting losses of income or output following the event. While the former is a static concept that is unambiguously negative, the latter is dynamic, likely negative in the short-term due to the associated destruction of production factors, but potentially declining and even reverting over time depending on the government’s ability to reallocate resources towards reconstruction and on the behavioral response of affected populations. Another crucial difference between the two types of impacts is that only the latter is captured by GDP. This box aims at shedding light on the direction and potential order of magnitude of the impacts that the Al Haouz earthquake may have on economic growth. It should be noted upfront that this analysis falls short of a full assessment, which will require information and data that were not yet available at the time of writing. The macroeconomic consequences of the earthquake will ultimately depend on: (i) the economic impacts caused by the disaster at the local level; (ii) the overall economic significance of the most impacted areas; (iii) potential economic spillovers to other regions. Regarding the first of these three determinants, and without factoring in the government’s response to the disaster, the impacts of the earthquake will be pronounced on local economic activities, at least in the short-term. According to the Ministry of Interior, the seism caused 2,946 casualties and more than 18 thousand injured; the partial or complete destruction of almost 60 thousand buildings; significant damages to various roads, hydraulic infrastructures, more than 500 schools and several health centers. In addition, the earthquake is reported to have caused the death of numerous cattle, an important source of food and income for mountain communities. This constitutes a major loss of labor and capital that will inevitably affect potential output in these areas. On the other hand, the reconstruction process could also boost local economies in the medium and the long-term. First, the cash transfers that will be allocated to affected households for a period of one year and the wages potentially generated by the reconstruction effort could boost consumption, particularly in remote mountain communities where income opportunities were limited before the disaster. Second, the government’s investments could offer significant opportunities to substitute the traditional activities that were prevalent in the area (primarily small-scale agricultural and pastoral activities) for new occupations in higher value-added sectors such as construction. Third, to the extent that the ambitious plan announced for the High Atlas succeeds at unlocking the touristic and agricultural potential of these provinces, it may catalyze a longer-lasting reallocation of production factors to more productive activities. Whether these positive impacts get to surpass the negative ones discussed above remains to be seen during the implementation of the plan. But the government’s “build- back better” vision is sufficiently ambitious to potentially change the development dynamic of a region that has so far been largely excluded from the profound socioeconomic transformations undergone elsewhere in Morocco over the past two decades. The second key determinant of the earthquake’s impact at the macro level is the economic weight of the area where economic activity has been disrupted due to the disaster. The two regions which concentrate impacts (Marrakech–Safi and Sous–Massa) contributed to 15 percent of national GDP on average between 2014 and 2021. However, conditions are reported to have normalized relatively fast in most urban centers, and the main disruptions to economic activity are now restricted to rural communities in the provinces of Al Haouz, Chichaoua and Taroundant. Morocco does not produce national accounts at the provincial level, but using electricity consumption as a proxy suggests that these three provinces could contribute to approximately 4.3 percent of GDP.a Other statistics confirm that the three provinces have a limited economic weight at the national level (Figure 21), which will dilute the impact of local economic disturbances on national GDP. Even within the three most affected provinces, damages (and thus disturbances to economic activity) were rather localized, concentrated in rural communities for which no publicly available statistical information exists. To assess the economic weight of these communities, we resort to alternative data sources based on satellite imagery or administrative data shared by the authorities. According to World Bank calculations, the area where the intensity of the earthquake was sufficient to cause considerable damage to buildings and infrastructure (VII or above on the MMI scale) contribute to about 1 percent of the country’s total capital stock and 0.3 percent of total nighttime light (data for 2022).b The statistics obtained from the SME observatory point in the same direction, as formal firms headquartered in the communities that are closer to the epicenter contribute to less than 0.1 percent of total turnover and jobs of Moroccan formal firms. (continued on next page) 16 MOROCCO ECONOMIC UPDATE – FROM RESILIENCE TO SHARED PROSPERITY PRELIMINARY ASSESSMENT OF THE MACROECONOMIC IMPACTS OF THE AL HAOUZ BOX 4:  EARTHQUAKE (continued) Participation of the three most affected provinces over national total (percentage), FIGURE 21 •  as proxies for their economic weight prices in domestic markets (ASAAR database, distinguishing periods) 9 7.9 8 7 6 5 4.3 4 2.8 3 2.3 2 1.6 1.2 1.32 1 0.7 0.6 0 Electricity Cereal Cattle Projected value Tourist Share of total Number of Turnover of Jobs in formal consumption production (*) of construction overnight capital stock formal firms formal firms firms (*) (*) projects with a stays (**) (***) (***) (***) permit (*) (*) * Data from HCP (annuaire statistique des régions). ** World Bank staff calculations. Total capital stock calculated using a perpetual inventory approach. Provincial disaggregation produced with: (i) spatial allocation of exposures based on high resolution global population layers (GHSL etc.); (ii) built floor areas obtained via m2 per person in urban/rural areas making also use of latest building footprints datasets and then distributed to different structural typologies/vulnerability classes using census; (iii) urban/rural mapping also done using global layers such as GHSL SMOD; (iv) replacement unit construction cost values (US$/m2) for different types of buildings based on engineering data. *** Obtained from the database of the Moroccan Observatory for SMEs (Observatoire Marocain de la TPME), an institution attached to the central bank which gathers administrative data for the Moroccan formal private sector, analyses them, and produces indicators and decision-making tools. Finally, the macro impacts of the earthquake could be channeled through the spillovers that economic disruptions in the most affected areas could have on other regions. Available information suggests that many of the communities that have been hardest hit by the earthquake have generally weak interlinkages with the national economy, which will limit the scale of such potential spillovers. However, the earthquake could adversely affect international tourists’ willingness to travel to Morocco, most notably to Marrakech, which is both the top tourism destination in the country and the only one that has suffered some significant material damages due to the seism. Available evidence to date suggests that this scenario is not materializing, as international arrivals have increased by 7.1 percent y/y in September despite the earthquake. The World Bank and IMF annual meetings having taken place in October may have reinforced the attractiveness of the Marrakech brand for international travelers. The empirical evidence on the impact of earthquakes on tourism also calls for cautious optimism. Roselló, Becken and Santana-Gallego (2020) use a global dataset on natural disasters, and find that even if the number of casualties is high, when the direct losses caused by an earthquake are limited and critical infrastructure is spared (such as airports or major hotels), as is the case with the September 8th seism, tourism tends to recover fast, and even surpass pre-disaster levels by 2 percent after six months and by 3 percent after twelve months. Several contributions have focused on specific events, finding mixed results. While some earthquakes such as Sichuan (2008) or Nepal (2015) are found to have been followed by an increase in inbound tourism, others, such as Marmara (1999) triggered the opposite effect (Huang et al., 2020; Min et al., 2020; Bayram and Cifi, 2021). a Al Haouz, 0.9 percent; Chichaoua, 0.6 percent; Taroudant, 2.8 percent. b The Modified Mercalli Index (MMI) is a scale used to measure the intensity of shaking and damage caused by an earthquake at specific locations. It ranges from I to XII, with VII and beyond considered sufficiently strong to cause considerable damage to buildings. GDP growth is expected to accelerate to last year’s drought and return to average levels in 2024. 2.8 percent in 2023, and to firm up to 3.1 percent Services will remain a major contributor to growth on in 2024. The agricultural sector should contribute to the back of a buoyant tourism sector, expected to the acceleration, as key crops gradually recover from recover fast from the impact of the earthquake. Despite Outlook and Risks 17 the maintained strength of the export-oriented man- non-tax revenues through asset monetization opera- ufacturing niches that has been observed in recent tions. Overall, this should help contain the budget def- years, the performance of the secondary sector will be icit, which is expected to close 2023 at 4.6 percent of tempered by weak global conditions and a modest per- GDP, and to reach 3.6 percent of GDP by 2025. In this formance of construction in a context of higher interest scenario, the debt ratio would stabilize below 70 per- rates. Domestic demand is forecasted to begin recover- cent of GDP. ing from recent shocks, supported by an improvement in labor market conditions, remittances, the upcoming deployment of the family allowances program, and the Risks to the macroeconomic outlook gradual moderation of inflation. The current account deficit is expected The balance of risks is tilted to the downside. to narrow in 2023 due to improved terms-of- As emphasized in Box 1, Morocco continues to con- trade, but rising energy prices and the recov- front unusually dry conditions, implying that the ery of domestic demand could widen it in 2024. gradual recovery of agricultural production is far Together with the fading terms-of-trade shock that from guaranteed. The government has renewed was triggered by the Russian invasion of Ukraine, its investment and reform efforts to address the growing tourism and remittances inflows will contrib- structural water scarcity problem that the coun- ute to reduce the current account deficit to 1.8 per- try is increasingly facing in the context of a rap- cent of GDP in 2023. However, energy prices surged idly changing climate. Should these policies prove by 8.3 percent in September, and have continued to insufficient, water may have to be rationed for agri- remain strong following the conflict in the Middle East; culture but also to other sectors of the economy, this could exert renewed pressure on the trade bal- which could cost up to 6.5 percent of GDP in the ance in the months to come. Together with the pro- long term (World Bank, 2022). On the international gressive increase in domestic absorption that will front, Morocco is exposed to the risks posed by cur- take place as consumption and investment begin to rent geopolitical tensions, which could result in new recover from recent shocks, this would widen the def- terms-of-trade shocks should the price of food and icit to 2.5 percent of GDP in 2024. Despite the tempo- energy commodities surge again. This could result rary decrease observed in the first semester of 2023, in a higher trade deficit, reducing the recent con- we expect FDI to remain strong and sufficient to cover tribution of net exports and FDI to growth. It could most of this current account deficit, as large new man- also slow the ongoing disinflationary process, which ufacturing greenfield investment projects continue to would adversely impact households’ real dispos- be announced. able income and thus consumption, while potentially Despite strong spending pressures, the forcing BAM to review the stance of its monetary pol- budget deficit is expected to gradually return icy, which would affect investment. to pre-pandemic levels. The measures adopted Morocco needs to reconstitute its room to cope with recent shocks and the water crisis, the for maneuver to cope with future shocks. As dis- rollout of an ambitious health and social protection cussed in Chapter 1, Morocco has demonstrated a reform, and the reconstruction effort following the remarkable capacity to cope with global disturbances earthquake could continue to increase public spend- in recent years. However, the government’s response ing. However, the authorities are also implementing to these shocks has eroded fiscal buffers, which several measures to create fiscal space, including could limit the country’s capacity to address future the ongoing tax reform, the absorption of various pre- disturbances. Given the increasing frequency of inter- existing social programs into the family allowances, connected crises at the global level, Morocco needs or the envisaged reform of price subsidies on butane to rebuild these buffers, which are essential to prevent gas, flour, and sugar. In addition, the government future shocks from derailing its development process. plans to continue mobilizing significant amounts of This will require prioritizing reforms to increase its pub- 18 MOROCCO ECONOMIC UPDATE – FROM RESILIENCE TO SHARED PROSPERITY lic revenue mobilization capacity and the efficiency of cation of which is the introduction of a Carbon Border public spending, and reinforcing the countercyclical Adjustment Mechanism (CBAM). role played by public finances. Together with the fiscal Reverting declining potential growth reform that has already began, the envisaged intro- remains a major development challenge for duction of a carbon tax could be an effective tool both Morocco. As discussed in Box 5, recent estimates to increase public revenues and to accelerate the confirm that Morocco’s potential growth has declined decarbonization of the economy. In turn, this agenda over the past two decades. It currently hovers around could help preserve, and possibly improve, access 3.6 percent, below the average for emerging markets to European export markets, which are increasingly and developing economies (EMDEs). The material- focused on the climatic agenda, the most recent indi- ization of such a growth rate over the years to come BOX 5: MOROCCO’S POTENTIAL GROWTH IN COMPARATIVE PERSPECTIVE Potential growth can be defined as the real growth rate of output when all factors of production are allocated optimally. Since potential output cannot be observed, it needs to be estimated, for which different methodological approaches have been developed. Following Kose and Ohnsorge (2023), this box applies the production function approach, analyzing the evolution of Morocco’s potential growth since the turn of the century together with international comparisons, and providing projections until 2030. Under this approach, potential growth is calculated as a function of total factor productivity (TFP), fully utilized capital stock, and the potential labor force.a While potential TFP and employment are estimated using panel regressions, the potential capital stock is based on consensus forecast estimates. According to these estimations, Morocco’s potential growth has declined from an average of 4.8 percent between 2000 and 2010 to 3.7 percent between 2011 and 2021 (Figure 22). This is aligned with the global trend observed in emerging and development economies (EMDEs), 57 percent of which underwent a decline in potential growth during these two periods. However, Morocco’s recent potential growth is below that of EMDEs, which is estimated at 4.9 percent on average for the 2011–2021. On the other hand, it is higher than that observed for most of the regional peers considered in this analysis, with the only exception of Egypt (Figure 23). Morocco’s potential growth is expected to stand at 3.6 percent on average in 2022–2030, still somewhat below the average in EMDEs, but clearly surpassing the Middle East and North Africa region (2.5 percent). FIGURE 22 • Contribution to potential growth FIGURE 23 • Comparison with peers (2011–21) (percent) (percent) 6 6 5 4 4 2 3 2 0 2000–10 2011–21 2022–30 2000–10 2011–21 2022–30 1 Morocco EMDEs Capital Labor TFP Potential growth 0 Kuwait Tunisia Jordan Morocco Egypt Source: World Bank staff based on Kose and Ohnsorge (2023). Source: World Bank staff based on Kose and Ohnsorge (2023). a Potential labor supply is estimated as the as the population-weighted aggregate of predicted values of age- and gender-specific labor force participation rates from regressions on policy outcomes and cohort characteristics, business cycles, and country effects. Outlook and Risks 19 would be clearly insufficient to achieve one of the key and sectors. This would increase the contribution of objectives of Morocco’s New Development Model: total factor productivity (TFP) to economic growth and doubling per capita income by 2035.15 This provides boost job creation, which in turn would facilitate the a strong justification for the reforms launched by the inclusion of women into the labor market. But a higher authorities to boost human capital and stimulate pri- female labor force participation could also increase vate investment. However, this effort may not lead to economic growth by itself, potentially creating a vir- the economic take-off that is desired unless other criti- tuous cycle that is discussed in more detail in the fol- cal micro-constraints to growth are relieved. More spe- lowing chapter. cifically, additional market reforms may still be needed to remove the regulatory and institutional obsta- 15 Reaching this doubling of per capital income by 2035 cles that limit competition and slow the reallocation would require Morocco to have an average annual of production factors towards more productive firms growth rate of more than 7 percent per year. 20 MOROCCO ECONOMIC UPDATE – FROM RESILIENCE TO SHARED PROSPERITY TABLE 1 • Morocco, selected economic indicators, FY19–FY26 Estimated Projected 2019 2020 2021 2022 2023 2024 2025 2026 Real Economy (annual percent change, unless otherwise indicated) Real GDP 2.9 –7.2 8.0 1.3 2.8 3.1 3.3 3.5 Agricultural GDP –5.0 –8.1 19.5 –12.9 1.5 5.7 3.1 3.3 Non-Agricultural GDP 3.8 –7.1 6.7 3.1 2.6 2.8 3.1 3.4 Industry 4.1 –5.2 7.1 –1.7 0.3 2.0 2.5 3.0 Services 3.9 –7.9 5.8 5.4 4.0 3.1 3.5 3.7 Private Consumption 2.2 –5.6 6.9 –0.7 1.0 2.1 2.7 3.4 Government Consumption 4.8 –0.6 7.2 3.3 3.4 3.6 3.3 3.0 Gross Fixed Capital Investment 1.7 –10.0 7.6 –2.2 1.6 2.0 2.4 3.2 Exports, Goods and Services 5.1 –15.0 7.9 20.4 10.8 6.9 10.9 12.9 Imports, Goods and Services 2.1 –11.9 10.4 9.0 6.4 4.8 8.4 9.5 Unemployment rate (ILO definition, in percent) 9.2 11.9 12.3 11.8 … … … … Inflation (average CPI, in percent) 0.2 0.7 1.4 6.6 6.2 3.8 2.8 2.0 Fiscal accounts (in percent of GDP) Expenditures 27.4 34.1 31.3 32.2 32.2 31.5 30.6 30.4 Revenues, including all grants 23.8 27.0 25.3 27.0 27.6 27.4 27.0 27.1 Budget Balance –3.6 –7.1 –6.0 –5.2 –4.6 –4.1 –3.6 –3.3 Central Government Debt 60.3 72.2 69.5 71.6 70.3 69.7 69.3 69.1 Selected Monetary accounts (annual percent change, unless otherwise indicated) Broad Money 3.8 8.36 5.1 8.4 … … … … Interest (key policy interest rate) 2.3 1.5 1.5 2.5 … … … … Balance of payments (in percent of GDP, unless otherwise indicated) Current Account balance –3.4 –1.2 –2.3 –3.5 –1.8 –2.5 –2.2 –2.0 Imports, Goods and Services 42.0 38.1 42.5 56.3 51.9 51.5 50.5 49.1 Exports, Goods and Services 34.2 30.8 33.2 44.8 42.3 41.4 40.7 42.3 Net Direct Investment 0.6 0.8 1.1 1.2 1.3 1.3 1.4 1.5 Gross official reserves (bln US$, eop) 26.4 36.0 35.6 32.3 35.6 36.5 37.7 39.3 In months of imports 6.9 7.1 5.3 5.3 5.5 5.6 5.7 6.0 Local currency per U.S. dollar (period average) 9.6 9.5 9.0 10.2 … … … … Memo items Nominal GDP (in billion dirhams) 1,240 1,152 1,275 1,330 1,452 1,554 1,650 1,747 Source: WB staff estimates and forecast; actual data from MEF, HCP and BAM. Outlook and Risks 21 3 WOMEN’S ECONOMIC EMPOWERMENT AND DEVELOPMENT T here is an impressive amount of international labor force implies that the economy is not making full evidence confirming the positive impacts use of the existing talent stock, an untapped resource that women’s participation in labor markets that hinders total labor productivity and potential can have on economic growth and long-term devel- growth, particularly when the quality of the female opment. In this context, Morocco’s low and declining labor force increases with education. Discrimination female labor force participation (FLFP) constitutes a in the labor market, difficult access to human capital, major untapped potential for economic and social and patriarchal social norms translate into a misallo- dynamism. This special focus chapter analyzes the cation of women’s innate talent across occupations, roots of Morocco’s high rates of female inactivity from as they are not realizing their comparative advantage a comparative perspective. It also presents some sim- (Hsiesh et al., 2019). When misallocation impacts ulations illustrating the major impacts that increasing entrepreneurial talent and female human capital accu- FLFP could have on the economy. Finally, it discusses mulation, it can also have negative impact on technol- some of the measures and reforms that could con- ogy adoption and innovation (Esteve-Volart, 2009). For tribute to economically empower Moroccan women. example, the progressive integration of women and African American men is estimated to have contrib- International evidence uted to between 20 percent and 40 percent of growth in aggregate market output per person between 1960 Global evidence shows that gender equality and and 2010 in the United States. women’s empowerment can result in overall long- Furthermore, when women are economi- term socio-economic development. Gender equal- cally empowered, their children are healthier and ity is not only a matter of social justice or human rights, better educated. This knock-on effect increases chil- but also a critical driver of economic and social devel- dren’ own chances of finding a job and be productive opment. When it comes to economic empowerment, as adults, contributing to increasing welfare for both the reason is intuitive: the exclusion of women from the their families and the overall economy (The World 23 Bank 2012; Duflo, 2012; IMF 2013; Heintz 2006; Galor determining the exit of women from the labor market and Weil, 1993). at the age of marriage, as well as the limited expan- Despite this compelling evidence, women sion in sectors that we proved critical for expanding continued to have a disadvantaged position female employment like manufacturing and services. in labor markets, in particular in the MENA region. The difference between men’s and wom- Female labor force participation en’s total expected lifetime earning is still as high in Morocco as US$172.3 trillion globally, twice the world GDP (Wodon et al., 2020). Gender gaps in employment, Despite economic and social improvements, FLFP and especially in entrepreneurship, cause an average in Morocco has been declining over the past two income loss of 15 percent in the OECD, and 27 per- decades and is now among the lowest in the world. cent in the Middle East and North African (MENA) According to official numbers, women participation region (Coubiere, 2016). In the MENA region, women in the labor market decreased from 30.4 percent only generate 18 percent of GDP (world average in 1999 to 19.8 percent in 2022, an almost 11 per- 37 percent) and increasing women labor force partici- centage points drop (HCP). The disparity between pation to the levels of men could boost GDP by 47 per- male and female participation has remained signif- cent directly (McKinsey Global Institute, 2015). In the icant and consistent, fluctuating around 50 percent- Maghreb countries of Morocco, Tunisia and Algeria, age points. These findings contrast with the trends less than 3 out of 10 women work, only slightly higher observed in other indicators typically associated with than the MENA average of 19 percent and less than higher FLFP rates. Notably, despite recent economic half the level of low- and middle-income countries. growth, decreasing fertility rates, and an increase in 2023 Nobel laureate Claudia Goldin’s female education levels (as depicted in Figure 25.), the U-shape theory on the relationship between FLFP low level and decline in FLFP persists. Such low rates and economic development does not seem to hold places Morocco at the bottom of the world distribu- for the MENA region, where participation should tion, as the recent international ranking of the World be higher and already increasing. According to that Economic Forum places Morocco 142th in the sub- theory, women participate fully in economic activity in index of Economic Participation and Opportunity of the early stages of development, doing unpaid work their Global Gender Gap Index out of 146 countries. on farms and family businesses. With development, Overall dynamics in labor markets can- however, they tend to withdraw from the workforce not fully explain FLFP structurally low level, sug- as jobs migrate to industries and cities. Plausible gesting that specific constraints are at play. As explanations for the decline in women’s participation depicted in Figure 26, Morocco’s declining FLFP in include the fact that households are gradually depen- Morocco between 2001 and 2018 is predominantly dent on less than two incomes, as well as the stig- attributable to a fall in agricultural employment, not matization of the phenomenon of women engaged in compensated by job creation in manufacturing and manufacturing activities in factories (Caraway, 2007). urban services. Although urban net job creation was As a result, countries tend to experience a reduction positive over the period, it was insufficient to absorb in their FLFP rate as they develop economically, fol- these losses and the expanding labor force (Lopez- lowed by a recovery (Goldin, 1995). However, the the- Acevedo et al., 2021). However, of the total number ory does not describe well the MENA region, where of jobs created over the period, only 5.8 percent went current levels of income should correspond to a to women, and out of approximately 13 million work- higher and increasing FLFP, especially when the level ing-age women, only 2.5 million were working in 2018, of education is factored in (Verme, 2015; Gaddis and of which 1.5 million were remunerated. These num- Klasen, 2014; and Klasen, 2019). Proposed explana- bers suggest that additional constraints are prevent- tions concern the role of social norms, affecting the ing women from accessing the few existing economic way households allocate time to different tasks and opportunities that are available. 24 MOROCCO ECONOMIC UPDATE – FROM RESILIENCE TO SHARED PROSPERITY FIGURE 24 • Labor force participation rate in MENA 100% 80% 70.0% Percent of female/male population ages 15+ 60% 40% 21.0% 20% 0% Yemen Iraq Egypt, Arab Rep. Jordan Algeria Iran, Islamic Rep. Syrian Arab Republic Djibouti MENA West Bank and Gaza Morocco Tunisia Saudi Arabia Lebanon Oman Libya Bahrain Kuwait Low & Middle Income* Malta United Arab Emirates Israel Qatar Female Male Source: International Labour Organization. Accessed April 25, 2023. Data from the SME Observatory lifecycle. The existence, intensity, and persistence of (Observatoire Marocain de la TPME) show that in gender gaps in outcomes, including participation in 2022 women represented only a third of total for- the labor market, are determined by the interactions mal private sector employment, with a very marked of several, country specific factors including markets, sectorial segregation. Approximately 50 percent total legal frameworks, social norms, and household pref- female formal employment is concentrated in agricul- erences (World Bank, 2012). Such interactions affect ture, manufacturing, and retail. In these sectors, the women differently, based on their level of education, wage gap is particularly important, with 63 percent resources, the contexts they evolve in, and specific of women operating in the lowest salary bracket (less moments in their life. Morocco is no exception: edu- than 2,800 DH), against 43 percent of men.16 On the cated women in urban areas are subject to different other hand, there is an overrepresentation of women constraints compared to those in rural areas, while in the education and health and social action sectors all of them seem to be penalized, at varying extents, (70 and 71 percent of total formal employment, respec- by marriage, motherhood, and the number of depen- tively), while they feature relatively well in manufacturing dents in the household (World Bank 2023). (45 percent). Increasing opportunities in these sectors Women with higher levels of education are where the share of women is already high, minding dis- more likely to be active and employed, but do not crimination in career progression and wages, could manage to overcome gender specific constraints be beneficial. However, while female employment in preventing their transition and staying in the labor the former two sectors has increased in line with the market. Unlike men, women with secondary or higher evolution of sectorial value added (VA), this is not the education exhibit a higher probability of being active case for manufacturing, where VA increased by one (34 percent for secondary, 64 percent for higher third between 2007 and 2018, but the share of female employment decreased by 7p.p., according to HCP. 16 Importantly, information for experience and education In Morocco, constraints differ in nature and level is not available to control for these aspects while intensity across women’s characteristics over the assessing the wage gap. Women’s economic empowerment and development 25 Macro and socio-economic indicators FIGURE 25 •  FLFP by area of residence (2001–2018) FIGURE 26 •  5.2 85 40% FLFP (percent of female population ages 15+) 4.7 School enrollment, secondary 75 Fertility rate / GDP per capita 35% (%) / Female LFP 15+ 4.2 65 3.7 55 30% 3.2 45 2.7 25% 2.2 35 25.3 21.7 25 1.7 20% 1.2 15 15% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Fertility rate, total (births per woman) 10% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 GDP per capita (current US$, thousands) School enrollment, secondary, female (% gross) Female labor force participation (15+) Urban Rural Source: WDI and World Bank 2023. Source: HCP LFS series. education) as well as higher employment rates (see constraints exacerbate these norms, including a lim- regression analysis in Appendix 1). However, their par- ited offer of safe public transport in rural areas, lower ticipation has significantly declined (–11 p.p.), contrib- financial inclusion and access to digital technologies, uting to a 27 percent rise in inactive educated women and skills do not help bypass existing constraints. since 2000 and representing an increasingly larger In urban areas, women generally have share. Educated women also have a significantly higher quality jobs, but work relatively less. Urban lower participation rate compared to men (–22 p.p) women are more likely to hold formal wage work and higher unemployment rates (+16p.p), despite (82 percent urban vs. 9 percent rural) in the service the narrowing of the education gap. While skills mis- sector (30 percent of total female employment), or in match does not seem to be a gender specific issue public administrations (24 percent urban vs. 11 per- (Betcherman et al, 2022), sectorial segregation, non- cent rural), enjoying more stable contracts and bet- gender-friendly conditions in the workplace and low ter conditions. However, activity among urban women wages represent important constraints for educated with low education is the lowest, mostly restricted to women to transition into employment and pick up the low value-added services, including especially edu- existing opportunities for middle-level skilled workers. cation, care activities and services to households. Rural women are more likely to work but Working outside the household, more common and evolve in more traditional contexts and are less necessary in urban settings, comes with a different set connected to opportunities outside the house- of constraints, exacerbated by existing social norms: hold. They are mostly working in agricultural activi- typically, pervasive harassment in public spaces ties within the household’s premises (92 percent of and non-gender friendly conditions in the workplace them). Less educated compared to working age (including suitable working hours, a safe environment women in urban areas, they mostly work as unpaid, and an adequate salary), greatly discourage women’s informal family worker (71percent). Traditional social participation. Importantly, the lack of childcare ser- norms are more prevalent and stringent in rural areas, vice is a major constraint for urban women, who often affecting women capacity to seek economic opportu- lack the resources to afford private childcare services. nities outside the households, or accessing produc- Married urban women have a 35 p.p. lower participa- tive resources for personal investments. Such norms tion probability than unmarried peers and 23 p.p. less put most value in the role of women as spouses and than divorced or widowed women, which amplifies with mothers, rather than economic agents. Structural pre-school kids and elderly dependents (Appendix 1). 26 MOROCCO ECONOMIC UPDATE – FROM RESILIENCE TO SHARED PROSPERITY The potential economic dividends of FIGURE 27 • The effect of an increase in increasing FLFP in Morocco women employment (by 10 p.p. – Scenario1; and by 20 p.p – Scenario 2) on inequality, poverty and Increasing FLFP could help revert Morocco’s vulnerability; percentage points declining potential growth. The production function (p.p.) change approach that was applied in Box 5 is used to sim- ulate the potential impacts of accelerating the inclu- 1.0 0.58 0.28 sion of Moroccan women in the labor markets. Two 0.5 simulations are conducted. The first scenario is con- 0.0 servative and assumes that the FLFP ratio increases –0.5 –0.24 –0.41 –0.46 –0.58 linearly from 20 percent in 2022 to 25 percent in 2026. –0.64 –0.64 –1.0 –0.85 –0.86 –1.03 The second one is more ambitious and assumes that –1.04 –1.21 –1.5 –1.30 –1.42 the FLFP rate reaches the long-term objective of the –2.0 –1.86 –1.92 NDM (45 percent in 2035). The impact of both scenar- –2.5 ios is significant, increasing potential growth by 0.3 –2.54 –3.0 and 0.8 percentage points respectively. As a result, Low High Mixed Low High Mixed by 2035 potential GDP would be 2.4 percent higher skilled skilled skilled skilled than the baseline in the conservative scenario, and SCENARIO 1: FLFP +10 p.p. SCENARIO 2: FLFP +20 p.p. 7.2 percent in the ambitious one.17 This is the direct Inequality (Gini index) Poverty (p.p.) Vulnerability (p.p.) effect only—knock-on effects (i.e., higher invest- ment in human capital) would be additional to this.18 Source: WB calculations based on the HCP – Household Budget Survey 2013–14 (HBS, 2013–14). Macro-economic estimations recently produced by Note: The distribution of households’ disposable income (consumption) is uprated the Government of Morocco (Bargain and Lo Bue from the survey year (2013–14) to 2019 considering quintile-specific growth rates from 2013 to 2019. Population weights are updated to the policy year using 12 2021) based on a panel of countries and considering age-group’s growth rates by area (rural and urban). Inequality is measured by the the effect of increased investment in human capital, Gini coefficient; official national poverty and vulnerability liens have been updated from 2013 using CPI. New workers were randomly selected among the inactive and conclude that per capita GDP would increase by 39.8 unemployed, based on their level of education: low skills equals no education and percent in Morocco, should the employment gap be primary, high skills equals secondary or tertiary education. Increases in FLFP was simulated by Wages are approximated using official data on minimum salary (SMIG) completely eliminated. from CNSS: low skilled workers were attributed 60 percent of SMIG, high skilled workers were attributed 140 percent of SMIG. Women’s economic empowerment can also support Morocco in reducing poverty and inequalities. World Bank calculations show that an mented several important reforms in the recent increase the women employment among low-skilled past, especially of its legal framework. The workers may reduce inequality by between 1 and 2 Government implemented two national plans for pro- Gini points (Fig. 27). This would happen by increas- moting gender equality in 2012–16 and 2017–21, with ing the available income of households concentrated the goal of addressing gender inequities in several at the bottom of the distribution. Considering that key areas, including education and access to basic most of the inactive are low-skilled women, a random services, economic empowerment, gender-based increase in participation across the female popula- tion would also reduce inequality. Similar impacts are likely for vulnerability. 17 Other estimate point in the same direction: raising FLFP to equal the participation rate of men could result in 39 percent increase of average per capita GDP (World Policies for the economic Bank, 2023). 18 Several other types ef exercise achieve results of the empowerment of women same order of magnitude. World bank estimates of differ- ent definition of GEGI indicators suggest that long term As a testimony of its commitment to improve per capita GDP would increase by 38% if the employ- women economic inclusion, Morocco has imple- ment gap was eliminated (World Bank 2023). Women’s economic empowerment and development 27 BOX 6: FEMALE LABOR FORCE PARTICIPATION IN SAUDI ARABIA Since 2016, Saudi Arabia has witnessed an extraordinary surge in the participation of women in the labor force. This remarkable transformation represents a historic shift for the country, occurring within an exceptionally brief timeframe. The sharpest increase started in 2017, with a clear acceleration in 2020, when FLFP jumped from 24.6 to 29.5 percent in one year only. It is essential to recognize that Saudi Arabia embarked on this journey from a historically low starting point in terms of female labor force participation, ranking among the world’s lowest, while confronting substantial policy barriers for women’s employment. Saudi women swiftly secured employment opportunities, now constituting 38 percent of the total private sector workforce in the country. The rapidity of change is due to the progressive dismantling of existing constraints, including the removal of legal barriers, and the setting up of new economic opportunities for women. Rather than a single cause, this achievement finds its roots in a multisectoral set of changes, energetically triggered by the government in a coordinated way. These include a significant number of reforms of the legal framework starting in 2015, with an impressive number of key reforms concentrated between 2019 and 2020 and ranging from enabling women to pursue employment across all occupations and work hours, granting them the right to drive, enhancing maternity leave provisions, to the elimination of workplace gender segregation. Importantly, a revamp of many government programs and the creation of new programs with a focus on female employment followed the launch of Vision 2030, addressing gaps, including in accessing childcare, transport, flexible work options, and skills development, and providing concrete opportunities for women to seize, within a suddenly more gender-friendly enabling environment. Importantly, a mix of factors contributed to generate an unprecedented shock on labor demand, partly triggered by the COVID pandemic. Since the introduction of Saudi Vision 2030, the Saudi government has been dedicated to modernizing and diversifying the economy. The reforms implemented in this framework led to an expansion of the non-oil private sector. In parallel, the Saudization process, that found its origins back in 1985, accelerated in 2017 with the obligation of having 100 percent Saudis in certain sectors, including several branches of the retail subsector. This dynamic, coupled with the new job opportunities, resulted in an 87 percent increase in the number of working Saudi women between the beginning of 2017 and mid-2023. Last but not least, the COVID pandemic proved to be a catalyst of change, as it generated severe labor shortages due to the sudden departure of expatriate workers at the pandemic’s onset, followed by a swift reopening of the economy six months later. As Saudi women began to enter the workforce and sectors dominated by expatriates such as transportation, accommodation and food services and manufacturing, the broader societal mindset swiftly aligned with this new reality, thus amplifying the employment of Saudi women. Such demand side shocks are not unique to Saudi Arabia and have been in the past very effective to bring women into the labor force in other countries and regions of the world. Lastly, social norms on women working were ripe for rapid change. Recent research has unveiled that prevailing social norms regarding women’s employment were ready for transformation. The evidence points to the fact that many Saudi men and women were open to the idea of women working, even so they believed that others held more conservative views on the matter. Essentially, their assumptions about what others thought were mistaken. In such a scenario, when people’s actual attitudes become clear, social norms can shift swiftly. What learnings can be extracted from the Saudi experience for Morocco? Notwithstanding the important differences characterizing the two countries, including in the economic structure, the labor market conditions, and in governance and institutions, few lessons can be drawn. First, the role of policy is crucial. Removing legal barriers, implementing workplace protections, providing family support systems like parental leave and childcare, along with flexible work arrangements and other programs like transport support, are essential to enable women’s meaningful participation in the labor market, particularly for wage work in the private sector. Second, spreading widespread and visible information regarding the changing role of women in the labor market is essential. In many instances, societal acceptance may have existed but remained unspoken. Promoting the value of women’s workforce participation can serve as a catalyst for positive shifts in societal attitudes, further facilitating the integration of women into the labor force. Third, in the case of Saudi Arabia, a positive labor demand shock helped spreading the information that social norms on women working have shifted, besides generating real opportunities for women. While labor market conditions are deeply different in Morocco, where labor shortages as well as the presence of foreign workers are largely not an issue, this point goes back to the need to unleash private sector-led job creation, and facilitate women’s access to existing and new opportunities. violence (GBV), and women in positions of manage- 19 Such as the reform of the Constitution in 2011 affirming ment and leadership in the public and private sectors. gender equality, the reform of the Moudawana in 2004 As a result, gender parity was achieved in education, (the Family Code), and the reform of the Labor Code and several programs to increase female entrepreneur- the passage of Law No. 103.13 in 2018, intended to tackle GBV along four key legal dimensions prevention, protec- ship have been implemented, and meaningful legal tion, justice, and support. In 2021, Morocco adopted a reforms have been undertaken.19 Morocco has been new law establishing a gender quota of 40 percent in one of the pioneers in the world to implement Gender public limited companies (EPAs) Boards of Directors or Sensitive Budgeting. Since the Organic Budget Law Supervisory Boards within six years from adoption. 28 MOROCCO ECONOMIC UPDATE – FROM RESILIENCE TO SHARED PROSPERITY reform in 2015, the gender dimension is streamlined including reducing discrimination by looking at HR in ministerial programming and budgeting, with the processes, labor codes norms, and fiscal incen- objective of strengthening the oversight and coordi- tives will be critical. Crosscutting issues, on the other nation of the governmental action for gender equal- hand, include the supply of economic opportunities, ity. Reflecting this progress, Morocco scored 75.6 the improvement of the enabling environment for out of 100 in the World Bank’s Women Business and women to take up these opportunities, including via the Law index (2022), considerably higher than the further legal reforms, the provision of acceptable and MENA average of 51.5. Recently, HM the King has affordable childcare options, and shifting traditional requested the Head of the Government, as a follow up social norms. on his speech of July 2022, to propose reforms to the Morocco needs to create more jobs to be Family Code (the Moudawana), currently containing able to absorb inactive women and new entrants articles concerning the status and rights of divorced in the labor market. Insufficient job creation is an women, as well as gender-discriminating inheritance important barrier to the increase FLFP, although not laws, both seen as impediments to women’s eco- the only one. Between 2000 and 2019, the working- nomic empowerment. While it is too early to know age population grew on average by about 374,000 the specific components of the reform, this provides annually while the economy created an average of a clear indication on the roadmap in which Morocco 112,000 additional jobs per year, resulting in a large is embarking. and growing employment shortfall. Morocco’s growth The achievement of the ambitious objec- has had a low capacity to create employment com- tives set of the New Development Model will pared to many other countries, and this employment require a paradigm shift. The priority measures intensity of growth slowed after the 2008 financial cri- spelled out in this development plan are organized sis. Lack of contestability and the important role of in three pillars: addressing the social constraints that SOEs have been identified as major obstacles to pri- limit women’s ability to actively participate in the econ- vate firms’ entry, growth, and job creation (Asif et al., omy; strengthening the provisions for women’s edu- 2022). cation, training, placement, mentoring, and financial Despite recent reforms, the Moroccan inclusion; and instilling the value of gender equality legal framework still needs some change both while insisting on zero-tolerance to gender-based dis- on content and application. Legal reforms can crimination and violence. To achieve its ambitious lead to higher FLFP, greater movement out of agri- objective, Morocco will have to strengthen the insti- cultural employment, and higher rates of women in tutional set up of gender actions, including a strong wage employment (Hallward-Driemeier et al, 2013; leadership capable of coordinating a multisectoral Adnane 2021). Gender equality in the law also facil- plan of prioritized actions with associated budget itates cross-country income convergence over time commitments, and a monitoring and evaluation frame- (IMF, 2022). In Morocco, explicit and implicit norma- work to communicate on progress and to generate tive discrimination against women persist in several learning on what works (and what not). legal codes and need to be progressively addressed. Both context-dependent and crosscutting Importantly, the lack of impact of recent reform has constraints will need to be addressed. In rural been attributed to flaws in their implementation, and areas, where women have acute mobility issues and the limited access women still have to the justice sys- are mostly engaged in productive activities within tem. Insufficient information and knowledge about the households, financial inclusion could play an existing rights is an issue, especially in rural areas important role to facilitate access and management (The World Bank, 2023). of resources, while digital technologies could be lev- To strengthen female labor supply, the pro- eraged to increase productivity and access markets. vision of quality, affordable and socially accept- In urban areas, where wage work is more prevalent, able childcare services will be essential. More tackling gender-friendly conditions in the workplace, and more global evidence confirms the benefits of Women’s economic empowerment and development 29 childcare provision (especially daycare and preschool ular sectors and occupations, but these norms interventions) on FLFP, mainly because women, who are malleable than we think. The male breadwin- disproportionately bear the burden of care within the ner-female caregiver model, based on the belief that households, can free some of their time to dedicate men are supposed to economically provide for the to productive activities (Evans, Jakiela, and Knauer, household while women are supposed to bear and 2021). Moreover, developing the childcare supply also raise children, and care the family and home is prev- generates new jobs and entrepreneurship opportuni- alent in Morocco, as elsewhere in MENA. A recent ties, resulting in short-term employment effects that study shows that approximately half of the respon- are higher than corresponding investment in less dents in Morocco still agree with the statement that labor-intensive industries such as construction (which women should not work if the husband or father has the highest employment-to-growth elasticity in earns a sufficient income to cover household needs Morocco). Increasing access to childcare can also sup- (Sqalli et al., 2023). However, perceptions are dif- port children’s cognitive development and prepared- ferent across genders, as 72 percent of Moroccan ness for primary school, with long-term implications men agree that “a woman’s most important role for social mobility and productivity. While pre-school is to take care of the home and cook for the fam- for children age 4 to 6 has been made compulsory ily” compared to 49 percent of Moroccan women in Morocco and scaled up dramatically in the last five (Promundo and UNWomen, 2017). Importantly, years, the system to deliver is nascent. Most services things are shifting in the country, as witnessed by for the zero to 4 years-old are private daycare facili- the vibrant advocacy activity of civil society, or the ties, geographically concentrated in urban areas and increasingly insistent stance of HM King Mohamed largely unaffordable. To expand the service, it will be V. An upcoming World Bank study on “Social important to look into the demand for childcare, which Norms and Women’s Employment” is uncover- is different in urban and rural areas and determines ing stereotypes in the household, community and its acceptability (in terms of quality and social norms), schools that may impact women’s participation in the role of the private sector, including as employer, as the labor market. It will include experiments that, well as a system of incentives and quality assurance to test the extent to which behavior shifts occur when support enrollment across all levels of income. information perceptions and on economic opportu- Social norms can affect women’s deci- nities or correcting misperceptions are accessible sion to work and/or to pursue careers in partic- (Bursztyn et Al. 2018). 30 MOROCCO ECONOMIC UPDATE – FROM RESILIENCE TO SHARED PROSPERITY APPENDIX 1: DETERMINANTS OF THE FEMALE PROBABILITY OF BEING ACTIVE T he likelihood of women’s (15–64) labor mar- ket prospects, offset by marriage. Household duties, ket participation is assessed considering childcare, and elderly care limit activity when there individual traits (age, education, marital sta- are more young children or elderly members. Male tus), household features (size, child ages, elderly, wage-earner presence suppresses female partici- head education, male wage-earner), and local labor pation, impacting need for female labor. Household market conditions (employment composition, resi- head’s education role is less clear over time. Local dential area, regional effects). The model is estimated labor demand quality affects women’s activity. separately using census data for (i) 2004, (ii) 2014, More high-skilled employment at the provincial level (iii) 2014 urban, and (iv) 2014 rural. Findings show increases female participation due to suitable job that higher education improves women’s labor mar- opportunities. 31 Estimation results (average marginal effects): determinants of the female probability of being TABLE 2 •  active (probit model) Sample 2004 2014 2014 urban 2014 rural Education Primary 0.0799*** 0.0553*** 0.0729*** 0.0105** (ref. less than primary) Secondary 0.253*** 0.281*** 0.249*** 0.183*** University 0.381*** 0.531*** 0.447*** 0.354*** Marital status Married –0.355*** –0.333*** –0.343*** –0.164*** (ref. Single) Divorced/Widowed –0.129*** –0.0910*** –0.0829*** –0.0354*** Household characteristics Household size –0.000227 –0.00449*** –0.00701*** –0.00277*** N of children in the HH (0–5) –0.00678** –0.0183*** –0.0350*** –0.00426** N of children in the HH (6–15) 0.00197 0.000409 –0.00612** 0.00471*** N of elderly in the HH (65+) –0.00397* –0.0120*** –0.0180*** –0.00475* HH head education: primary –0.0103* –0.0168*** –0.0133*** –0.0257*** HH head education: secondary 0.0160** –0.00653* –0.000601 –0.00752 HH head education: university 0.0462*** –0.000328 0.00940 –0.00777 Wageworkers in the HH –0.0244*** –0.0178*** –0.00920** –0.0195*** Structure of local employment High-skills blue collar 0.00394*** 0.000521 –0.000511 0.0000644 Share of male workers 15–64 at the province level by type of job Low-skills white collar –0.00198 –0.00122 –0.0000745 –0.00371* (ref. Low-skills blue collar) High-skills white collar 0.00880*** 0.00629*** 0.00446*** 0.00797** Area of residence Urban area 0.0727*** (ref. Rural area) Region F.E. Yes Yes Yes Yes Observations 440,729 997,437 612,226 385,211 Pseudo-R2 0.24 0.26 0.29 0.11 Data: Census, 2004, 2014 (IPUMS). Sample: women (15–64) excluding students. Note: p-values: * p<0.05 ** p<0.01 *** p<0.001. Standard errors clustered at the province level. 32 MOROCCO ECONOMIC UPDATE – FROM RESILIENCE TO SHARED PROSPERITY REFERENCES Acevedo et Al.2021. Trends and Determinants of Cubieres, Teignier, 2016. Aggregate Costs of Gender Female Labor Force Participation on Morocco: Gaps in the Labor Market: A Quantitative an initial Exploratory Analysis. IZA DP No.14218. Estimate. UB Economics Working Papers March 2021. 2014/308. Adnane, 2021. Women’s Economic Participation Duflo, E., 2012, “Women Empowerment and Economic and Impact of regulatory Barriers. EFI Insight Development,” Journal of Economic Literature, – Trade, Investment and Competitiveness. Vol. 50, No. 4: pp. 1051–079. Washington, DC: World Bank. Esteve-Volart, B., 2009. Gender Discrimination and Asif et Al. 2022. Jobs Undone : Reshaping the Role Growth: Theory and Evidence from India. of Governments toward Markets and Workers Manuscript. in the Middle East and North Africa. The World Evans et Al. 2021. The Impact of early childhood Bank, Washington DC. License: Creative interventions on mothers. Science 372, 794 Commons Attribution CC BY 3.0 IGO. (2021) DOI: 10.1126/science.abg0132. Bargain and Lo Bue, 2021. Couts économiques des Gaddis, I and Klasen, S. (2013) Economic inégalités de genre dans le marché du tra- Development, Structural Change, and vail au Maroc. Direction des Etudes et des Women’s labor force participation. J Popul Prévisions Financières. Econ, doi:10.1007/s00148-013-0488-2. Bayram, Ciftci. 2021. “The effects of earthquakes Galor and Weil, 1993. The gender Gap, Fertility, on tourism: evidence from Turkey”. Journal of and Growth. NBER Working Paper #4550. Tourism, Leisure and Hospitality. 2021, 3(2): November 1993. 84–94. Goldin C. (1995) The U-Shaped Female Labor Betcherman et Al, 2022. Overcoming barriers to youth Force Function in Economic Development employment in Morocco: An in-depth diagno- and Economic History. In: Schultz T.P. (ed) sis and the policy implications. Forthcoming. Investment in Women’s Human Capital and 33 Economic Development. University of Chicago Mckinsey Global Institute, 2015. The power of parity: Press; Chicago 1995. Pp. 61–90. how advancing women’s equality can add $12 Goldin, C., 1990. Understanding the Gender Gap: trillion to global growth. McKinsey&Company. An Economic History of American Women, Min, Jihye & KC, Birendra & Kim, Seungman & Lee, Cambridge University Press, Cambridge. Jaehoon. (2020). “The Impact of Disasters on Guanghua Chi, Han Fang, Sourav Chatterjee, Joshua a Heritage Tourist Destination: A Case Study E. Blumenstock. 2022. “Microestimates of of Nepal Earthquakes”. Sustainability. 12. 6115. wealth for all low- and middle-income coun- 10.3390/su12156115. tries”. Proceedings of the National Academy of Promundo and UNWomen, 2017. Understanding Sciences Jan 2022, 119 (3) e2113658119; DOI: Masculinity. International men and gender 10.1073/pnas.2113658119. equality suryve (images) – Middle East and Hallward-Driemeier, M., & Gajigo, O. (2015). North Africa. Strengthening economic rights and women’s Queyranne, M, D. Baksa, V. Bazinas, and A. occupational choice: The impact of reforming Abdulkarim. 2021. “Morocco’s Monetary Policy Ethiopia’s family law. World Development, 70, Transmission in the Wake of the COVID-19 260–273. Pandemic”. IMF Working Paper WP/21/249. Heintz, J., 2006, “Globalization, Economic Policy and Rosselló, J, S. Becken, M. Santana-Gallego. 2020. Employment: Poverty and Gender Implications,” “The effects of natural disasters on interna- International Labour Organization, Geneva. tional tourism: a global analysis”. Tourism Hsiesh et al. 2019 The Allocation of Talent and U.S. Management, vol. 79, August 2020. Economic Growth. Econometrica. Volume 87, Teri Caraway (2007) Assembling Women: The Issue 5. September 2019. Feminization of Global Manufacturing. Ithaca: Huang, Li & Yin, Xin & Yang, Yang & Luo, Mingzhi Cornell University Press. ISBN: 978-0-8014- & Huang, Songshan. (2020). “Blessing in 7365-4. disguise”: The impact of the Wenchuan The World Bank, 2012. Gender Equality and earthquake on inbound tourist arrivals in Development, World Development Report. Sichuan, China. Journal of Hospitality and Washington DC. Tourism Management. 42. 58–66. 10.1016/j. The World Bank, 2021. Morocco Economic Monitor: jhtm.2019.11.011. Building Momentum for Reform. Washington International Monetary Fund, 2013. Women, Work, DC. and the Economy: Macroeconomic Gains From The World Bank, 2023. Policy Note. Female labor Gender Equity. Washington DC. Force Participation in Morocco: Constraints and International Monetary Fund, 2021. Legal Gender Priority Actions. The World Bank. Washington Equality as a Catalyst for Convergence. IMF DC. Working Papers. The World Bank, 2023. The Women Business and the Klasen, 2019. What Explains Uneven Female Labor Law Index for Morocco. https://wbl.worldbank. Force Participation Levels and Trends in org/content/dam/documents/wbl/2022/ Developing Countries? The World Bank snapshots/Morocco.pdf. Research Observer. Published by Oxford The World Bank 2013. Opening Doors. Gender University Press on behalf of the International Equality and Development in the Middle East Bank for Reconstruction and Development/ and North Africa. MENA Development Report, THEWORLD BANK. World Bank, Washington DC. Kose, M. Ayhan (ed.); Ohnsorge, Franziska (ed.). The World Bank. 2022. Morocco Country Climate 2023. Falling Long-Term Growth Prospects: and Development Report. CCDR Series. World Trends, Expectations, and Policies. © World Bank, Washington, DC. © World Bank Group. Bank : Washington, DC. http://hdl.handle.net​ Verme, 2015. Economic development and female /10986/39497 License: CC BY 3.0 IGO. labor participation in the Middle East and 34 MOROCCO ECONOMIC UPDATE – FROM RESILIENCE TO SHARED PROSPERITY North Africa: a test of the U-shape hypothesis, the Gender Dividend? Measuring Selected IZA Journal of Labor & Development (2015) 4:3 Impacts and Costs of Gender Inequality. The DOI 10.1186/s40175-014-0025-z. Cost of Gender Inequality Notes Series;. © Wodon, Quentin; Onagoruwa, Adenike; Malé, World Bank, Washington, DC. http://hdl.han- Chata; Montenegro, Claudio; Nguyen, Hoa; dle.net/10986/33396 License: CC BY 3.0 IGO. de la Brière, Bénédicte. 2020. How Large Is References 35 SELECTED RECENT WORLD BANK PUBLICATIONS ON MOROCCO Morocco Country Climate and Development Report October 2022 CCDR Trends and Determinants of Female Labor Force Participation in Morocco: An Initial Exploratory March 2021 Policy Research Working Paper Analysis 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 Oct. 2019 Doing Business Morocco 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 37 SUMMARY OF SPECIAL FOCUSES FROM THE LATEST MOROCCO ECONOMIC UPDATES Fall 2022 MEU: “Responding to Spring 2022 MEU: “The Recovery is Supply Shocks” Running Dry” The Special Focus of the ‘’Fall 2022’’ ME’ analyzes the The impacts of rainfall shocks on the Moroccan impact of the inflationary surge across the income dis- economy have been rendered increasingly appar- tribution. It shows that inflation is substantially higher ent by a recent succession of droughts: three in for poorer households due to the larger weight of food the past four agricultural campaigns. Although the in their consumption basket. Existing price subsidies agricultural sector contributes to a moderate share have somewhat softened the impact of inflation on of GDP and modern irrigation systems have been poverty and vulnerability. However, a disproportion- successfully expanded over past decades, erratic ate share of the public resources needed to sustain rainfall levels remain an important source of mac- Morocco’s untargeted price subsidy schemes end up roeconomic volatility in Morocco, a trend that cli- flowing to wealthier households, which in absolute mate change could be intensifying. Coping with terms consume more of the subsidized goods. In the water scarcity has long been a governmental prior- future, a well targeted cash transfer program would ity and massive infrastructure investments are still constitute a more effective and efficient tool to miti- planned for that purpose in the decades to come. gate the impact of the shock on poor and vulnerable However, international experience suggests that, households. This analysis also underlined the impor- when not paired with strong demand management tance of computing high-frequency price indicators at policies, “engineering” solutions alone may not suc- the local level to improve the measurement and mon- ceed at curbing pressures on increasingly scarce itoring of poverty and vulnerability. water resources. 39 1818 H Street, NW Washington, DC 20433