Morocco’s growth momentum faces reform test despite investment boom

Morocco has recorded stronger economic performance than many comparable middle income economies since 2022, supported by public investment, foreign capital inflows, tourism growth, and its strategic position linking Europe, Africa, and China. A new study, however, warns that sustaining this momentum will require deep structural reforms beyond the current investment driven model.

Published by Le Grand Continent, the study examines whether Morocco’s recent economic expansion represents a lasting transformation or a temporary cycle of growth. The analysis was authored by researchers Abdelaaziz Ait Ali, Mahmoud Arbouch, Fahd Azaroual, Karim El Aynaoui, and Adnane Lahzaoui.

Since 2022, non agricultural GDP growth has averaged 4.4%, rising to 4.8% from 2024. This performance exceeds the pre pandemic average by 1.3 percentage points and approaches the levels recorded during Morocco’s strong growth period between 2000 and 2008.

Per capita GDP increased by 2.7% annually between 2022 and 2025, outperforming comparable middle income economies by 0.8 percentage points.

Public investment drives expansion

The study identifies public investment as the main engine of growth. Gross fixed capital formation contributed an average of two percentage points to annual growth between 2022 and 2026, accounting for roughly half of overall economic expansion.

The investment rate is projected to reach 30% of GDP during 2025 and 2026. State owned enterprises, including Royal Air Maroc, ONCF, and ADM, have played an increasing role in capital spending since 2024. Public investment in the broader fiscal framework is expected to stabilize around 19% of GDP.

Household consumption also supported the recovery. After inflation averaged 6.3% during the 2021 and 2022 period, easing price pressures from 2023 helped restore domestic demand. Consumption contributed approximately 1.7 percentage points to annual growth.

Despite these gains, net exports reduced growth by an average of 1.7 percentage points per year. The current account deficit reached around 3.5% of GDP in 2024 as imports of equipment and construction materials linked to public projects increased.

The researchers note that this trend raises concerns about the effectiveness of public spending due to significant import leakages. Their estimates place the short term fiscal multiplier at 0.3 for overall public spending and 0.7 for public investment.

Foreign investment strengthens industrial position

The reorganization of global supply chains has benefited Morocco. Net foreign direct investment flows increased from 0.7% of GDP in 2023 to 1.8% in 2025.

Chinese investment has played a major role in this trend. The Gotion Gigafactory project in Kénitra for electric battery production could reach a total investment value of $6.5 billion. Another major project is CNGR Advanced Material’s battery materials facility in Jorf Lasfar, representing approximately $2 billion in investment.

Chinese capital is now present across battery production, electrical components, electric mobility, and green hydrogen sectors.

Manufacturing represented 44.7% of net foreign investment inflows in 2024, compared with 21.4% in 2020. The automotive sector’s share increased to 13.7%, while electrical equipment rose from 0.6% to 13.3%.

The study also highlights the contribution of remittances from Moroccans living abroad. Most transfers continue to support household consumption, while a smaller share is directed toward savings and investment.

Tourism emerged as another major contributor to growth. Morocco welcomed nearly 20 million visitors in 2025. The sector accounted for 7.3% of GDP in 2024, compared with 6.8% in 2019. Tourism employment expanded by 4.6% annually between 2000 and 2023, the fastest pace among tradable sectors.

Information and communications technology services also showed strong performance. Programming and IT consulting generated 2.4% of gross export value added between 2010 and 2020.

Structural challenges remain

The study identifies three major constraints that could limit future growth.

The first is rising debt, which could restrict the government’s ability to maintain current levels of investment. More than half of public enterprise financing comes from bank borrowing, complemented by domestic bond issuance.

The second challenge is declining investment efficiency. The incremental capital output ratio increased from 6.0 between 2000 and 2007 to 11.5 between 2008 and 2019 before improving to 8.8 between 2022 and 2025.

The third issue is the weakness of the domestic private sector. Businesses continue to face limited access to credit, competition from the informal economy, and fiscal distortions.

According to the study, public financing can also reduce private lending. A public financing shock lowers private credit growth by 1.24 percentage points after four quarters and by 2.31 points after twelve quarters as banks shift resources toward public debt instruments.

Productivity remains another concern. Total factor productivity contributed an average negative 0.3% to growth between 2001 and 2023, compared with a positive average of 0.2% in emerging and developing economies.

The researchers describe Morocco’s growth model as one driven primarily by expanding production factors rather than productivity gains.

Structural transformation also remains incomplete. Non tradable sectors increased their share of total value added from 63.9% in 2000 to 67.1% in 2023. Workers leaving agriculture have largely moved into lower productivity service activities rather than manufacturing industries.

Agriculture has faced additional pressure from recurring droughts and declining water resources, averaging growth of only 1.1% since 2014.

External risks add uncertainty

The study notes that tensions in the Middle East have introduced new risks. Energy prices have increased between 50% and 60% since late February.

In response, the government opened MAD 20 billion in supplementary credits, equivalent to roughly 1% of GDP in additional fiscal pressure for 2026. Sovereign credit default swap spreads initially increased before stabilizing, while domestic Treasury bond yields remain above levels seen before the conflict.

The researchers compare Morocco with economies such as Mexico, Poland, and Vietnam, which have also benefited from their positions within evolving global supply chains.

They conclude that Morocco’s role as a connector state linking Europe, Africa, and China creates significant opportunities. However, they argue that lasting growth will depend on addressing labor market rigidities, education challenges, innovation weaknesses, and barriers facing the private sector.