Positive outlook for Morocco’s development prospects
The country could outperform its low-middle-income African peers – but only if it resolves the Western Sahara/SADR dispute.
4 January 2024

North Africa and the Sahel have generally been in the news for all the wrong reasons. Coups last year rocked Mali, Niger, Chad and Burkina Faso, warring factions are tearing Libya asunder, and African migrants seeking greener pastures are defining domestic politics in the European Union (EU).

Several natural disasters caused widespread destruction in 2023, including Libya’s floods and an earthquake in Morocco. Another quake hit the country this week.

However, new analysis on Morocco’s development prospects provides some good news.

The country is unique in several respects. Geographically, it’s the only African nation with Atlantic and Mediterranean coastlines, and a land border with an EU member (Spain) at the tiny enclaves of Ceuta and Melilla.

It claims the disputed Western Sahara territory, a sparsely populated area of mostly desert and a former Spanish colony rich in phosphates and fisheries, and which it part-annexed in 1975. The status of the Sahrawi Arab Democratic Republic (SADR), proclaimed as such by the Polisario Front, remains a divisive issue in the African Union (AU). Morocco left the AU in 1984 shortly after the SADR was admitted as a member, only rejoining in 2017.

Morocco is one of few African countries to achieve the SDG of eliminating extreme poverty

Morocco is one of only two semi-constitutional monarchies in Africa – Lesotho is the other. Both have an elected Parliament, placing them in a modestly more democratic league than Eswatini, Africa’s last absolute monarchy.

Unlike most other North African states, Morocco depends heavily on imported hydrocarbons to meet its energy needs. It has been unable to develop oil or gas resources despite vigorous exploration efforts. While the amount of electricity production from renewable sources increases year-on-year, the share of renewables in total final consumption decreases, given Morocco’s expanding energy demand.

In the wake of the Arab Spring that started in Tunisia in December 2010, Morocco witnessed street protests demanding, among others, the removal of the king’s executive powers. Morocco was ultimately less affected by the widespread popular revolt than other countries in the region, probably because it had experienced several years of solid economic growth.

King Mohammed VI, who ascended to the throne in 1999, also adopted several reforms early in his reign that softened the harsh authoritarianism evident previously.

The Moroccan constitution – prepared through a consultative commission and reflecting some political reforms – was adopted by referendum in 2011. It outlaws single-party rule and requires that political parties not be founded on a religious, ethnic or regional basis. It grants the political opposition the right to ‘free, honest and transparent’ elections, equality between men and women, and various personal and political rights, including the right to strike.

Nearly two-thirds of Moroccan jobs are in the ‘grey’ economy and nearly 77% of employment is informal

After years of steady growth, Morocco experienced a sharp economic deceleration in 2022 due to domestic and international shocks, including a drought and high commodity prices. This happened despite efforts to open its economy for greater private-sector participation and investments in education, health and ICT competitiveness that improved productivity.

Still, the country struggles with an inflexible labour market. A large component of its labour force is engaged in the informal sector – with up to two-thirds of Moroccan jobs in the ‘grey’ economy. Nearly 77% of employment is informal if one includes the large subsistence agricultural sector. The dominance of state-owned enterprises that receive favourable treatment and are exempt from competition laws is a drag on economic growth.

With a gross domestic product (GDP) per capita of US$8 368 (in 2017 values), Morocco is classified as a lower-middle-income economy. On the Current Path or business-as-usual forecast based on the International Futures forecasting platform, Morocco’s GDP per capita will rise to US$10 718 in 2043. But it has the potential for an increase of up to 33% above that, outperforming its low-middle-income African peers.

One of the reasons for this optimistic forecast is that Morocco has a more mature population structure than most African countries and already benefits from a large working-age population relative to dependents. On the Current Path trajectory, Morocco’s population will increase from 36.5 million in 2019 to 43.3 million in 2043. However, inequality is relatively high.

Efforts to benefit from excellent trade relations with the US and Europe have been disappointing

Among the eight sectoral interventions modelled, full implementation of the African Continental Free Trade Area scenario will have the greatest positive impact on GDP per capita. In contrast, the manufacturing scenario is most likely to reduce extreme poverty, followed by growth in agriculture. Morocco is one of few African countries to achieve the Sustainable Development Goal of eliminating extreme poverty.

Morocco’s efforts to benefit from excellent trade relations with the United States (US) and Europe have been disappointing. Comprehensive free trade agreements were signed with the US in 2006 and the EU in 2000. Trade in industrial products is entirely liberalised, and Morocco also has substantial access to the EU’s agriculture market.

Negotiations for a Deep and Comprehensive Free Trade Area started in 2013 but were put on hold in 2014 at Morocco’s request. An amendment of the EU-Morocco Association Agreement protocols, which extended tariff preferences to products originating in Western Sahara, entered into force in 2019.

In response to the lacklustre results from trade with the US and Europe, recent years have seen a determined effort to turn more towards trade and investment in Africa, which offers significant opportunities. Morocco has launched an aggressive campaign to woo African countries, including joining the AU in 2017, hosting the organisation’s 2018 summit, and serving on its Peace and Security Council.

Still, its trade with the rest of Africa is low, as is regional trade integration in North Africa. The Western Sahara/SADR dispute is the single largest impediment to economic growth and diversification of the economies of Morocco and North Africa generally. Progress towards resolution is urgently needed.

Jakkie Cilliers, Head, African Futures and Innovation, ISS Pretoria

This article was first published in Africa Tomorrow, the ISS African Futures and Innovation blog.

Image: © Hemis / Alamy Stock Photo

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