In its new report dated October 1, the American rating agency Standard & Poor’s (S&P) maintained the rating of Morocco’s sovereign debt BB+/Positive/B.
The agency slightly revised downwards its real GDP growth forecast for Morocco to 3.1% for 2024, compared to a previous projection of 3.4%, mainly due to a weaker than expected agricultural season.
“We believe water scarcity is likely to continue to hamper agricultural growth in the years to come. Despite ongoing diversification, economic growth in Morocco still relies largely on rain-fed agriculture, which makes it sensitive to rainfall regimes,” the report reads.
At the same time, the ongoing, albeit gradual, change in Morocco’s underlying economic structure and the good performance of the tourism, phosphates and derivatives, automobile and aerospace sectors will strengthen growth prospects and economic stability, notes the agency.
Economic growth reached 3.4% in 2023, slightly higher than the 3.1% we projected in our report published in March 2024. A series of business-friendly reforms aims to prioritize investment in the water and energy, as well as the modernization of the legal, institutional and regulatory framework, continues the agency.
Morocco aims to increase the share of private investment (both domestic and foreign) to two-thirds of total investment by 2035, compared to around one-third currently. This will, however, depend on the implementation of additional complementary reforms that will support Morocco’s ability to increase its attractiveness for foreign and domestic investments, according to S&P. Foreign direct investment (FDI) flows increased by 51.6% in the first half of 2024.
According to the rating agency, the implementation of structural reforms and social support programs will help avoid a sharp decline in budget deficits in the short term, support growth and support fiscal consolidation in the medium and long term .
“We forecast that Morocco’s general budget deficit will gradually reduce to 4.2% of GDP in 2024, compared to 4.4% in 2023, then approach 3.0% by 2027,” indicates the same source.
Authorities began reducing subsidies on butane gas in May 2024 and plan to phase out remaining subsidies on it as well as on wheat and sugar in the coming years. This will free up resources to finance part of the extension of medical coverage and targeted family allowances, notes the agency.
The authorities have started to implement the VAT reform, with the aim of simplifying the tax system and encouraging the formalization of businesses, thus following the same approach as that adopted by the authorities for income tax and corporate tax over the past two years.
“We forecast that Morocco’s GDP growth will average 3.6% in 2024-2027, compared to 1.5% in 2020-2023, thanks to the strong performance of the tourism, automobile and transportation sectors. aerospace,” the report states.
