Standard and Poor’s (S&P) Global Ratings upgraded Morocco’s short/long term economic outlook from stable to positive on Friday, highlighting the country’s tenacity in surmounting several obstacles, as well as its commitment to socioeconomic and fiscal reforms.
Despite facing shocks from the Russia-Ukraine armed conflict, the COVID-19 epidemic, and droughts, Morocco has retained access to both internal and external finance, according to the research.
S&P asserted that: “The positive outlook reflects our expectations that Morocco will build on its recent track record of implementing socio-economic and budgetary reforms, paving the way for stronger and more inclusive growth, and a reduction in budget deficits”.
One of the important reasons contributing to the revised prognosis is a significant decline in budget and current account deficits in 2023 which exceeded S&P’s estimates.
Sustained changes, particularly in industries such as tourism, automotive, and phosphates, are likely to boost economic growth.
The budget deficit fell to 4.4% of GDP, and the current account deficit shrank to 0.6% of GDP. Morocco’s yearly economic growth is expected to rise, averaging 3.6% between 2024 and 2027, thanks to strong exports and domestic demand.
Morocco’s GDP is forecast to expand by 3.4% in 2024, up from 3.1% in 2023, boosted with strong development in the tourist, automotive, and aerospace industries, before averaging 3.7% in 2025-2027.
Economic development is expected to be boosted by higher domestic demand, lower inflation, and increased private investment, which will benefit from ongoing economic reforms and faster growth in the eurozone, Morocco’s largest trading partner.
The agency anticipates that planned large-scale initiatives will help to drive development. This includes the 2025 Africa Cup of Nations (AFCON) and the 2030 World Cup, which Morocco will host.
Morocco’s general government budget deficit will steadily reduce to 3% of GDP by 2027. Rising revenue from vital industries like phosphates and tourism, as well as ongoing budgetary changes, will boost the public finances. For example, the VAT reform seeks to simplify and unify the tax system while incentivizing formality through the development of new VAT withholding procedures. According to the 2024 appropriation bill, the change is expected to generate 1 Bln MAD by 2026.
General government debt, net of liquid assets, is expected to stay at 64% of GDP by 2027. However, Morocco’s exposure to refinancing and foreign exchange risk is rather low. As of the end of 2023, the average term of central government debt was more than seven years, with a projected average cost of 3.2% for domestic debt and 3.6% for external debt.
The study also cited the country’s continuing economic restructuring toward formalization and inclusion as a good development. Efforts to expand social protection and digitization are projected to formalize more of the economy, broaden the tax base, and reduce income gaps between cities and rural regions.
While concerns such as water shortages and reliance on rain-fed agriculture are still present, the agency stated that Morocco has implemented a comprehensive action plan to address these issues through infrastructure investment and water consumption efficiency improvements.