After a 6.3% contraction in growth in 2020, Morocco's economy posted 1% real GDP year-on-year expansion during the first quarter of 2021, boosted by a strong rebound (20.5%) of value added agriculture following abundant rainfall, and of some manufactured exports. The service sector still posted contraction, pulled down by the underperformance of Morocco’s relatively large tourism industry because of the pandemic. Various indicators suggest that the recovery of other non-agricultural activity may also have slowed during the second quarter.

Macroeconomic policy continues to be supportive. Fiscal response to the shock of the pandemic led to a widening of the budget deficit to 7.6% of GDP in 2020, and total public spending continued to edge upwards in 2021. The government has relied primarily on domestic markets to cover its financing needs since the sale of US$3 billion in international bonds in December 2020. In a context of moderate pressure on prices, the central bank’s base lending rate has remained unchanged at a historical low of 1.5%. Its stock of non-performing loans has stabilized but still represents 8.4% of credit. Morocco’s external position has been resilient, and its foreign exchange reserve still covers seven months of imports, albeit with the trade deficit now widening somewhat due to a rise in oil prices and the recovery of imports.

Growth is projected to rebound to 5.3% in 2021, led by base effect and anextraordinarily good agricultural season rather than by a broad-based acceleration of economic activity. Morocco may return to its pre-pandemic level of GDP in 2022, followed by a gradual acceleration of growth, contingent on the successful implementation of both ongoing and planned reforms. Sustained mainly by the recovery of indirect taxes, the budget deficit is expected to start falling in 2021 (to 6.7% of GDP), stabilizing debt below 79% of GDP.

Source: World Bank, Morocco Country Overview