The Moroccan economy has been characterized by macroeconomic stability, with generally low inflation and an acceleration in growth rates over the past several years. Recent governments have pursued reform, liberalization, and modernization aimed at stimulating growth and creating jobs.
While economic growth has historically been hampered by an over-reliance on the agriculture sector, these reforms have made the economy more resilient, even in years of poor rainfall. Thus in 2007, continued strong performance by non-agricultural sectors ensured a positive growth rate, even as agricultural production contracted by nearly 20%. Growth in 2008 is estimated to have been close to 6%.
Morocco's primary economic challenge is to accelerate growth and sustain that improved performance in order to reduce high levels of unemployment and underemployment. While overall unemployment stands at 9.9%, this figure masks significantly higher urban unemployment, as high as 33% among urban youths.
Through a foreign exchange rate anchor and well-managed monetary policy, Morocco has held inflation rates to industrial country levels over the past decade. Inflation was 2.5% in 2007, but did spike to 3.9% in 2008 as a result of rising international commodity prices. Despite criticism among exporters that the dirham had become badly overvalued, the country maintained an account surplus until 2007, thanks to transfers from Moroccans resident abroad, tourism revenue, and foreign investment. Morocco has since run a slight deficit, but foreign exchange reserves remain strong, with over $28 billion in reserves, the equivalent of 6.8 months of imports at the end of 2008. The combination of strong foreign exchange reserves and active external debt management gives Morocco ample capacity to service its debt. Current external debt is estimated to have stood at about $18.6 billion at the end of 2008.
The current government is continuing a series of structural reforms begun under its predecessors. The most promising reforms have been in the financial sector, and privatization has reduced the size of the public sector. Morocco also has liberalized rules for oil and gas exploration and has granted concessions for many public services in major cities. The tender process in Morocco is becoming increasingly transparent. Many believe, however, that the process of economic reform must be accelerated in order to reduce urban unemployment.
In January 2006, the bilateral Free Trade Agreement (FTA) between the United States and Morocco went into effect. The FTA represents an important step towards a Middle East Free Trade Area. The U.S.-Morocco FTA eliminated tariffs on 95% of bilateral trade in consumer and industrial products with all remaining tariffs to be eliminated within nine years. The negotiations produced a comprehensive agreement covering not only market access but also intellectual property rights protection, transparency in government procurement, investments, services, and e-commerce. The FTA provides new trade and investment opportunities for both countries and will encourage economic reforms and liberalization already underway.
Information by U.S. Department of State