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Morocco: Economy
Country Study > Economy

ECONOMY


Overview: Morocco has a developing economy, and its citizens are poorer than their neighbors in Algeria and, especially, Tunisia. From 1999 to 2004, poverty declined from 19 percent to 15 percent of the population, according to World Bank estimates, but poverty remains a serious challenge, particularly in rural areas, where the rate exceeds 25 percent. Unemployment, which averaged 10.8 percent in 2004, is particularly acute for young people living in urban areas (as high as 26 percent). In order to keep unemployment under control and prevent related social instability, the government is seeking to achieve an economic growth rate of 6 percent. To promote this goal, the government is pursuing a program of economic reform and liberalization, including private-sector development. However, reform efforts have lagged, and in 2004 real economic growth was only 3.7 percent. Among other factors, analysts believe that economic growth has been hampered by the economy’s over-reliance on agriculture and would benefit from greater diversification. Morocco’s hydrocarbons industry is smaller and less dynamic than that of neighboring Algeria, but the sector may benefit from recent efforts to liberalize rules for oil and gas exploration in Morocco.

Gross Domestic Product (GDP): In 2004 Morocco’s GDP was US$50.1 billion and per capita income was US$1,677. Real GDP growth of 3.7 percent reflected strength in energy and mining and, to a lesser extent, tourism. Estimates for 2005 placed GDP at US$52.7 billion with a growth rate of about 1.8 percent. Morocco’s relatively slow growth compared with the rest of North Africa resulted from the sub-par performance of the agricultural and textile sectors. Economic output in 2004 was divided among sectors as follows: agriculture, 16.7 percent; industry, 29.7 percent; and services, 53.6 percent.

Government Budget: Government revenues for 2005 were estimated at US$12.94 billion and expenditures at US$16.77 billion. The resulting deficit would constitute about 7 percent of gross domestic product (GDP).

Inflation: In 2004 Morocco’s consumer price inflation was 4.1 percent.

Agriculture, Forestry, and Fishing: Morocco’s agricultural sector, including forestry and fishing, constituted 16.7 percent of gross domestic product (GDP) but employed 40 percent of the workforce in 2004. The agricultural sector is regarded as volatile, because of its vulnerability to inconsistent rainfall among other factors, and has been contracting in recent years. Morocco’s principal crops, in order of yield, are rice, sugar beets, barley, potatoes, tomatoes, and sugarcane. Other agricultural products include wheat, citrus fruits, olives, other vegetables, wine, and livestock. In 2002 Morocco’s forestry production consisted of 926 cubic meters of roundwood and about 83 cubic meters of sawnwood.

Morocco has substantial fishing resources. In 2002 the total catch, mostly sardines, weighed 896,600 metric tons. In July 2005, Morocco signed a fishing agreement with the European Union (EU) that gives the EU limited fishing rights within Moroccan territorial waters for the first time since 1999. Under the agreement, the EU is restricted to catching a maximum of 60,000 metric tons of small, open-water fish using 119 fishing boats per year. In exchange, the EU will pay Morocco US$43 million per year. This accord is much more modest than its predecessor, which expired in 1999.

Mining and Minerals: Morocco has two-thirds of the world’s phosphate reserves and is the world’s top exporter of phosphate rock. In 2003 Morocco mined nearly 22 million metric tons of phosphate rock. Morocco is a minor producer of oil and natural gas. In fact, it is the largest energy importer in North Africa. Crude petroleum production totaled only about 300 barrels per day in 2005. Natural gas production was estimated at 5 million cubic meters in all of 2003.

Industry and Manufacturing: Industry constituted 29.7 percent of Morocco’s gross domestic product (GDP) and employed 15 percent of the workforce in 2004. Manufacturing, a subset of industry, accounted for 18 percent of GDP. In 2004 manufacturing output was 41.6 percent higher than in 1992, indicating a relatively slow rate of growth, attributable to low levels of investment and productivity in combination with relatively high wages—higher than in China or India, for example. The worst performing manufacturing segment was textiles, which has experienced no growth since 1994, reflecting competition from Asian countries and a relatively strong domestic currency. By contrast, the top-performing segments—paper and metallurgical products—have grown by 90.9 percent and 86.4 percent, respectively, during this period. Morocco is the world’s leading exporter of phosphoric acid, which along with fertilizers is the most important product of the chemicals industry. The food-processing industry exports canned fruit, vegetables, and fish; the European Union is a major customer.

Energy: According to a January 2006 estimate by Oil and Gas Journal, Morocco’s proven oil reserves total 1.07 million barrels, while its proven gas reserves total 60 billion cubic feet, although additional reserves may lie offshore. Both figures fall substantially short of the corresponding amounts in neighboring Algeria. In fact, Morocco is a net importer of energy, including coal, which is needed to fire the country’s two main electric power stations. In 2003 Morocco produced an estimated 17.35 billion kilowatt-hours of electricity but consumed 17.58 kilowatt-hours.

Some 17 foreign energy companies are exploring for energy in Morocco. In 2000 Morocco began to provide tax incentives for offshore oil production and capped the share of foreign oil concessions reserved to the government at 25 percent. Comprehensive liberalization of the energy sector is expected in 2007. The disputed status of Western Sahara places in doubt the legality of oil and gas contracts in that country.

Services: Services accounted for 53.6 percent of the economy and employed 45 percent of the workforce in 2004. Financial services liberalization has been underway since the early 1990s, but it has fallen short of expectations, according to the World Bank. Despite efforts at privatization, many financial institutions continue to be owned by the government. The latest thrust in this campaign involves boosting the independence of the central bank and improving bank supervision and regulation. The latter is urgently needed because many banks suffer from extremely high levels of non-performing loans and inadequate reserves. The insurance sector has been streamlined with the closure of several poorly performing companies. Morocco has modernized the Casablanca stock exchange by introducing an electronic quotation system, centralized settlement, and brokerage rules.

Tourism is Morocco’s leading source of foreign exchange. In 2003 Morocco received 2.2 million foreign tourists, with the largest contingents coming from France, Spain, the United Kingdom, Germany, and Italy, in that order. If Morocco is to achieve its goal of boosting tourist visits to 10 million by 2010, it will need to address the shortage of suitable hotel accommodations.

Labor: The labor force was estimated to exceed 11 million in 2005. The distribution of the workforce in 2004 was as follows: 45 percent in services, 40 percent in agriculture, and 15 percent in industry. In 2004 Morocco’s unemployment rate was 10.8 percent, representing a gradual but steady improvement over a five-year period. The urban unemployment rate (18.4 percent) was much higher than the rural rate (3.1 percent). In addition, the unemployment rate was much higher for young people living in urban areas than for any other group. In 2002 the unemployment rate among city dwellers between the ages of 15 and 24 was 34.2 percent and 26.2 percent for those between the ages of 25 and 34. As of 2004, Moroccan law mandated a 44-hour workweek and a minimum wage of about US$223.30 per month for industrial workers. In the view of the U.S. Department of State, the minimum wage is inadequate to support a “decent standard of living” for a worker and his or her family.

Foreign Economic Relations: Morocco’s economy is gradually becoming more integrated into the international economic system. On January 1, 2006, a comprehensive bilateral free-trade agreement between Morocco and the United States went into effect. Morocco is only the second Arab nation to have such an agreement with the United States. In December 1999, Morocco entered into a free-trade agreement for industrial goods with the European Union (EU) and expects to participate in a free-trade zone with the EU by 2012. In February 1989, the leaders of Morocco, Algeria, Libya, Mauritania, and Tunisia established the Union of the Arab Maghreb (UMA) to promote a North African free-trade area. However, Algeria’s support for Western Saharan self-determination, Morocco’s condemnation of Iraq’s invasion of Kuwait in August 1990, and mutual visa restrictions by Algeria and Morocco motivated by security concerns rendered the UMA ineffective. Morocco has been a member of the World Trade Organization since January 1995.

Imports: In 2005 Morocco’s imports totaled US$18.2 billion. Principal imports were semifinished products; consumer goods; capital goods; fuel and lubricants; and food, beverages, and tobacco, in order of U.S. dollar value. The top import partners in 2004 were France, Spain, Italy, Germany, Russia, Saudi Arabia, China, and the United States, in order of the value traded.

Exports: In 2005 Morocco’s exports totaled US$9.5 billion. Principal exports were manufactured goods; semifinished products; food, beverages, and tobacco; and raw materials, in order of U.S. dollar value. Morocco leads the world in the export of phosphates. The top export partners in 2004 were France, Spain, the United Kingdom, Italy, and the United States, in order of the value traded. The European Union accounted for 71 percent of exports.

Trade Balance: In 2005 Morocco posted a merchandise trade deficit of nearly US$9 billion.

Balance of Payments: In 2005 Morocco’s balance of payments swung from a slight surplus to a deficit of US$607.5 million. The current account surplus had been declining gradually since 2001.

External Debt: In 2004 Morocco’s external debt totaled US$18.7 billion. The estimated figure for 2005 was US$15.6 billion.

Foreign Investment: In 2003 Morocco experienced a net inflow of foreign direct investment of US$2.3 billion. Of this amount, the United States accounted for only US$307 million. However, direct investment from the United States may receive a boost from the U.S.-Morocco Free Trade Agreement, which went into effect on January 1, 2006. The agreement removes barriers to investment and provides for the protection of intellectual property. Another catalyst for increased foreign direct investment is Morocco’s decision to liberalize the rules for oil and gas exploration.

Foreign Aid: The World Bank’s total historical involvement in Morocco through July 2005 consisted of 135 operations, representing a commitment of nearly US$9 billion. As of July 2005, the World Bank was pursuing 13 investment projects in Morocco. On December 15, 2005, the World Bank approved loans for financial-sector development, rural water supply, and sanitation investment. Each loan was denominated in the amount of US$200 million. Morocco has special drawing rights with the International Monetary Fund (IMF) but receives no aid from that organization. Since 1953, the United States Agency for International Development (USAID) has provided Morocco with more than US$2 billion of aid. In fiscal year 2005, USAID assistance to Morocco totaled US$28.2 million. In 2005 the United States designated Morocco for the first time as a beneficiary of the U.S. Millennium Account program. Morocco was selected in recognition of its progress in achieving political, economic, and educational reform. Morocco is the top beneficiary among Mediterranean nations of community assistance from the European Union, with commitments totaling more than US$1.4 billion during 1995–2003.

Currency and Exchange Rate: Morocco’s currency is the Moroccan dirham (MAD). In early May 2006, the exchange rate was approximately US$1=MAD8.7.

Fiscal Year: Calendar year.




Last Updated: May 2006


Editor's Note: Country Studies included here were published between 1988 and 1998. The Country study for Morocco was first published in 2006. Where available, the data has been updated through 2008. The date at the bottom of each section will indicate the time period of the data. Information on some countries may no longer be up to date. See the "Research Completed" date at the beginning of each study on the Title Page or the "Data as of" date at the end of each section of text. This information is included due to its comprehensiveness and for historical purposes.

Note that current information from the CIA World Factbook, U.S. Department of State Background Notes, Australia's Department of Foreign Affairs and Trade Country Briefs, the UK's Foreign and Commonwealth Office's Country Profiles, and the World Bank can be found on Factba.se.

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