World Bank: Citizens Left Out of Morocco’s Economic Recovery

Rabat – Morocco is witnessing an economic resurgence, with a 2.9% growth in the first half of 2023, following a significant slowdown in 2022, according to the latest World Bank report titled “Morocco Economic Update: From Resilience to Shared Prosperity.”

The report highlights that driving this rebound is Morocco’s services industry and net exports, the partial recovery of agriculture – which in 2022 had suffered from a -12.9% contraction in agricultural GDP – and tourism, with 12 million tourists having visited Morocco by the end of October.

Notably, inflation fell by a substantial 50% between February and August 2023, as detailed in the report. This indicates a positive change in economic dynamics, as Morocco appears to have overcome the obstacles that have temporarily hindered its growth.

Navigating the pressures of public spending

This economic revival is not without its challenges, as outlined in the World Bank report. Recent crises, compounded by ongoing healthcare and social protection system reforms, have exerted pressure on public expenditure.

Despite these challenges, the government has demonstrated a commendable commitment to gradually reducing the budget deficit, a strategy mentioned in the World Bank report. The report anticipates a sustained growth trajectory, projecting real GDP growth of 3.1% in 2024, 3.3% in 2025, and 3.5% in 2026, as domestic demand gradually recovers from recent shocks.

The Al Haouz earthquake: Local devastation, limited macro impact

The earthquake that struck Al Haouz on September 8 had devastating consequences, both in terms of human lives, with at least 300,000 people affected, and material losses, with 60,000 buildings totally or partially destroyed.

However, the macroeconomic impact is projected to be limited, according to insights from the World Bank report.

The World Bank analyzed that the affected areas constitute a modest share of Morocco’s GDP, primarily disrupting local economic activities.. In response to this catastrophe, the government swiftly provided financial aid to affected households and introduced an ambitious development plan for the High Atlas provinces.

This plan aims to foster inclusive growth in the medium and long term, but its implementation may pose additional challenges depending on the availability of funding.

External Resilience in the Face of Shocks

Morocco’s external resilience is a testament to the nation’s adept handling of various shocks, the World Bank report highlighted. From the Al Haouz earthquake to the broader challenges stemming from the COVID-19 pandemic and the Russia-Ukraine war, the country has demonstrated a remarkable capacity to weather disruptions.

The report emphasizes several indicators of this external resilience, including robust and growing foreign demand for Moroccan goods and services, a surge in foreign direct investment (FDI) directed towards the manufacturing sector, and sustained access to international financial markets amid global financial tightening.

Challenges to domestic well-being: A history of disparities

Behind the veneer of this external resilience however lies a concerning narrative of internal challenges, as detailed in the World Bank report. Household confidence is dwindling, reaching historically low levels.

In the second quarter of 2023, a staggering 87.3% of respondents reported a deterioration in their quality of life over the past year, a concerning trend highlighted by the World Bank report. Per capita GDP has not yet reclaimed its pre-pandemic levels, and per capita spending on consumption remains stagnant at pre-pandemic levels.

The country’s economic performance masks the disproportionate impact of food inflation on the poor and vulnerable. Additionally, segments of the population, particularly women and youth, find themselves excluded from the job market.

Job losses persist in rural areas, where agricultural activities continue to suffer from the multi-year drought that began in 2019. The Al Haouz earthquake has further highlighted persistent pockets of poverty in rural areas that have seen limited benefits from the profound economic transformation observed elsewhere in Morocco over the past two decades.

The imperative for further reforms

To fully leverage Morocco’s external resilience and foster lasting prosperity, further reforms are imperative, the report emphasizes.

The potential growth rate of the Moroccan economy has significantly declined since the 2000s, currently standing at 3.6%, below the average for emerging markets and developing economies.

While the government has initiated ambitious reforms to enhance human capital and encourage private investments, it is critical for sustained growth to address regulatory and institutional barriers to competition and make it easier to redistribute human capital, resources and technology between relevant economic sectors.

Empowering Women for Inclusive Growth

According to the report, a pivotal aspect of Morocco’s journey towards shared prosperity involves the empowerment of women through greater economic participation. International data underscores that gender equality is not merely a matter of social justice but a potent driver of socio-economic development.

Despite several ambitious reforms, a paradigm shift is still necessary to strengthen the economic empowerment of Moroccan women.

Simulations from the World Bank indicate that achieving the New Development Model’s goal of a 45% women’s participation rate in the labor market could significantly boost growth and reduce inequalities.

Targeted reforms and a call for paradigm shift

Efforts to empower women must be tailored to specific constraints faced in different contexts, as detailed in the World Bank report. In rural areas, addressing mobility issues and increasing financial and digital inclusion are paramount.

In urban settings, where wage employment is more prevalent, promoting favorable working conditions for women becomes essential.

Cross-cutting constraints must be comprehensively addressed, the World Bank advises. This includes improving economic opportunities, creating an enabling environment, implementing legal reforms, providing affordable childcare options, and challenging traditional social norms.