Press Release No. 24/53

IMF Staff Completes 2024 Article IV Consultation with Morocco

February 21, 2024

• Output growth accelerated in 2023,driven by a rebound of domestic demand and buoyant exports, and is projected to reach 3.5 percent over the medium term boosted by investment.
• The gradual reduction of the fiscal deficit strikes the right balance between the authorities’ intention to rebuild fiscal buffers and finance structural reforms. Doing so may require additional efforts to raise tax revenues and further rationalize spending. The current monetary policy stance is appropriate and should remain data dependent.
• Accelerating structural reforms is needed to boost a job-rich and more inclusive growth, by reforming the SOE sector, further extending targeted social protection, advancing health and education reforms, tackling the issue of water scarcity, and raising the contribution of renewable sources to the energy mix.

Rabat, Morocco: An International Monetary Fund (IMF) staff team led by Roberto Cardarelli conducted discussions with the Moroccan authorities in Rabat on the 2024 Article IV Consultation from January 31 to February 15. At the conclusion of the visit, Mr. Cardarelli issued the following statement:

“Economic growth has strengthened in 2023 thanks to the recovery in domestic demand and buoyant exports and is expected to increase gradually to around 3.5 percent over the medium term, boosted by stronger investment. Stronger domestic demand should gradually widen the current account deficit towards 3 percent of GDP, while inflation is projected to continue to fall slowly as pressures on commodity and food prices fade.

“The current monetary policy stance is appropriate, in light of the falling inflation and future changes to the monetary policy stance should remain data dependent. As inflation continues to fall, Bank Al-Maghrib should resume its transition to an inflation-targeting framework.”

“Staff welcomes the authorities' commitment to fiscal consolidation over the medium term. The generalization of social protection under the application of the Unified Social Registry promises to better target social support to those families who really need it. The reform of the VAT is expected to improve neutrality and incentivize formality, expanding the tax base. While the gradual reduction of the fiscal deficit over the next three years appears appropriate, there is room to ensure, and possibly accelerate, the pace of fiscal consolidation in the medium term. This will require completing the reform of the tax system, including of the VAT, improving tax administration, rationalizing spending, including the transfers to state-owned enterprises (SOEs), and expanding the use of the Unified Social Registry to all social programs.

“The expected greater participation of the private sector to the authorities’ infrastructure investment plans (particularly in water and energy sectors) calls for assessing, monitoring, and reporting the potential budgetary implications of future public private partnership programs. Further improvements of the fiscal framework include adding more information on the revenues expected to be generated by the mobilization of real government assets and quantifying the impact of all new policy measures on the fiscal deficit over the next few years.

“Boosting job creation and making growth more inclusive calls for accelerating structural reforms. The SOE reform and operationalization of the Mohammed VI Fund and the new Charter of Investment should help stimulate private investment, together with further efforts to strengthen the fight against corruption and address anti-competitive practices. Reforming the unemployment insurance scheme and improving active labor market policies could help boost job creation in the short run. Further efforts are needed to improve female labor force participation, which is at historical lows. The ambitious reforms of the health care sector and education system promise to improve access and quality of services and enhance capital accumulation in the long run. Recent and planned progress in liberalizing the electricity market should encourage the transition to renewable energy. The authorities’ infrastructure plan is essential to reduce water scarcity, together with a remodulation of water tariffs and further efforts at improving efficiency in the utilization of water resources.

“The IMF team held discussions with senior officials of the government of Morocco, Bank Al-Maghrib, and representatives of the public and private sectors. The team wishes to thank the Moroccan authorities and other stakeholders for their hospitality and candid and productive discussions.”