Rabat – A recent study published this week reveals that the informal economy represents roughly 20 percent of Morocco’s gross domestic product (GDP), excluding agriculture and 10 percent of formal imports.
On Thursday, the General Confederation of Enterprises of Morocco (CGEM) released the findings of its joint-study on the informal economy and its impact on the competitiveness of companies, conducted with the firm Roland Berger in 2014.
According to the report, the informal sector, which includes all non-agricultural economic activities conducted underground without the authorization of the relevant authorities, sees the highest proportion of job creation, with 2.4 million informal employees, representing nearly half of the working population.
This shadow economy constitutes 54 percent in textiles and clothing, 32 percent in road freight transport, 31 percent in construction, and 26 percent in the food and tobacco industry.
The report, which only includes entities engaged in legal but informal activity, highlights that informal economic operations generate almost MAD 170 billion in untaxed revenues, although it is difficult to obtain a precise estimate. The study notes that this hidden part of economy creates a shortfall for the state in terms of tax and social contributions.
The study also points out that Moroccan companies are losing profitability by limiting investment and innovation, while end-consumers are also suffering from non-compliance with hygiene rules and usage of substandard goods, adding that employment in this sector is associated with “insecurity, instability, lack of social benefits, and low average wages.”
The study, which involved professional federations, business leaders, and government representatives, as well as a steering committee representing the main sectors of Morocco’s economy, aims at making the formal sector more attractive than the informal one to guarantee more competitiveness for Moroccan companies.
It also aims at analyzing the informal sector and measuring its impact on businesses to better formalize the economy.
The government has already taken some steps towards formalizing the economy after introducing a new bill in 2016 that requires contracts for domestic workers and includes efforts to expand social security benefits to more workers.
Morocco’s attempts to shift more employees to formal payroll systems, will likely help boost government fiscal receipts, fight against corruption, and improve worker protections.