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Morocco

With GDP of USD 119 bn in 2019, Morocco is a medium-sized economy with strong growth potential. The country is hit very hard in 2020 due to Covid-19 pandemic. In addition to containment measures, external shocks have been significant (collapse of tourism activity, contraction of demand from Europe). The situation could have been worse without a swift response of the authorities, both on the monetary and fiscal policy sides. Public debt is expected to rise markedly but the situation is manageable as borrowing costs on the domestic market are favourable. The decision to draw on the IMF’s Flexible Credit Line has also helped to keep forex reserves at a comfortable level, and so eased pressure on exchange rate.

In March 2020, the Central Bank widened further the band in which the MAD trades against a basket of currencies from +/-2.5% to +/-5%. The MAD has remained stable without market interventions by the central bank. Further moves are expected but the authorities will continue to follow a cautious approach to give the economy enough time to prepare. Improved MAD flexibility will strengthen international competiveness and equip the economy to absorb shocks. The strategy is also consistent with the goal to position Morocco as a financial hub.

Looking ahead, the economic growth potential remains strong, supported by sound macroeconomic fundamentals and a solid banking sector. The fact that the country has been able to increasingly capitalize on its strategic location to become an industrial hub between Europe and Africa is also encouraging. Morocco is now the first car manufacturer in Africa, and high-quality infrastructure and competitive labour costs remain major assets. However, reforms will be necessary to make economic growth more inclusive. Unemployment is still high, especially for the young and graduates. In addition to cyclical factors, structural constraints will need to be addressed, such as the relatively low level of human capital. Agriculture remains also highly significant to the economy, resulting in considerable volatility in economic growth.

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