Is Morocco’s economy ready for the future? Key trends in growth, debt, and inflation

 The country’s GDP growth slowed to 2.6% in 2024, primarily due to external geopolitical tensions and global economic slowdowns, but the economy is poised for recovery, with GDP expected to accelerate to 3.9% in 2025 and 2026, supported by a favorable inflation trajectory and strong fiscal consolidation efforts.

Inflation, which reached 6.1% in 2023, is forecast to fall sharply to 1% in 2024, providing a significant easing of price pressures, before stabilizing at 2.4% in 2025 and 1.8% in 2026.

On the fiscal front, the government’s efforts to contain the deficit are paying off, with the fiscal gap projected to narrow from 4.5% of GDP in 2024 to 3.9% by 2026.

Public debt, which stands at 70.5% of GDP in 2024, is expected to decline to 68.7% by 2026.

Morocco’s external accounts also remain in a solid position, with the current account deficit projected to stay under 2% of GDP and foreign exchange reserves expected to reach MAD 400.2 billion by the end of 2026, covering more than five months of imports.

The banking sector continues to show impressive strength and stability. Net income for Moroccan banks surged by 17.3% in the first half of 2024, driven by strong market activity and improved intermediation.

Capital adequacy ratios remain well above regulatory requirements, with total capital at 16% and Tier 1 capital at 13.3% as of mid-2024, compared to minimum requirements of 12% and 9%, respectively.

The liquidity ratio has remained solid, with banks maintaining a comfortable buffer against potential economic shocks. The sector’s resilience was also confirmed by ongoing stress tests, which showed the banks’ ability to withstand significant economic downturns.

In the insurance sector, premiums rose by 4.5% to reach MAD 49.6 billion by October 2024, with both life insurance and non-life insurance segments showing growth.

Life insurance premiums increased by 4.4%, while non-life premiums grew by 4.6%. The sector’s investment portfolio expanded by 4%, totaling MAD 243.4 billion, and unrealized gains soared by 62.3%, benefiting from the rebound in equity markets and lower interest rates. This performance underscores the sector’s resilience and its ability to navigate market fluctuations effectively.

The Casablanca Stock Exchange also continues to perform well, reflecting investor confidence in Morocco’s economic trajectory. The MASI index has risen 22% year-to-date in 2024, signaling positive market sentiment.

The liquidity ratio on the exchange has improved as well, rising from 9.5% in 2023 to 11.48% in November 2024, indicating increased market depth and investor participation. The Price-to-Earnings (P/E) ratio stands at 17.7x, which is attractive compared to the five-year average, suggesting that the stock market remains undervalued relative to historical trends.

Additionally, the country’s financial governance continues to strengthen. Morocco’s successful exit from the Financial Action Task Force (FATF) grey list highlights its progress in enhancing anti-money laundering (AML) and counter-terrorist financing (CTF) frameworks.

The CCSRS emphasized that while significant strides have been made, continued efforts are required to maintain compliance ahead of the next round of evaluations by the MENAFATF in 2026.

Taken together, these indicators suggest that Morocco’s financial system remains on a stable trajectory. With strong fiscal discipline, resilient banking and insurance sectors, robust capital markets, and a commitment to improving financial governance, Morocco is well-positioned to weather global economic uncertainties and sustain its financial stability in the coming years.