Morocco’s growth diagnostic: Addressing constraints to leverage economic potential

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Working in close collaboration, the Kingdom of Morocco, African Development Bank (AfDB) and the United States Millennium Challenge Corporation (MCC), have conducted an exhaustive study on constraints and strengths impeding the country’s determination to promote a strong, sustained and shared growth. The study, entitled Morocco’s Economic Growth Analysis: Identifying Constraints to Broad-Based Growth* is derived from in-depth data-driven analysis supported by consultations with all government ministries, private sector, academia and civil society in Morocco. Its objective is to clearly identify constraints to private investment in Morocco and identity priority issues to be addressed in order to grow a strong, dynamic economy.

The report highlights three paradoxes that characterise the country's economy. Firstly, its growth, rate mainly private and public consumption-driven, remains below its potential despite the fact that Morocco attained 31.7% GDP investment rate in 2012 which was among the highest. Secondly, structural transformation of the economy has remained slow despite this double-digit performance. Thirdly, the private sector suffers from a lack of dynamism and absence of SMEs, whereas SMEs are a source of innovation in many countries.

The economy needs to change

To address these constraints, the country needs to implement reforms. At the moment there are two sets of constraints impeding Morocco’s private sector-driven growth.

The first is related to human capital: in spite of efforts made by the authorities, the country's education and training system is "the weak link in the development of [this] capital," the report says. The country has inadequate enrolments as well as low average length of time in education for a country with its average income level. This means that Morocco’s insufficiently skilled labour force which is does not have enough skilled or specialised workers, and the private sector suffers from this.

The second type of constraint hindering growth is at the micro-economic level which has the combined effects of a slow judicial system, a tax system perceived to be opaque and relatively burdensome, land that is difficult to access and constrictive labour market regulation.

Need for more innovation and coordination

In general terms, Morocco’s economy suffers from a lack of innovation, weighing heavily on the country's exports, which operate below their potential. This is not due to a lack of public encouragement as the government offers generous policies in this domain. The problem lies in poor coordination between actors in the private (within value chains) and public (dedicated agencies and relevant ministries) sectors on the one hand, and between the public and the private (promotion of trade agreements, for example) on the other hand that is proving to be defective.

Finally, to establish sustainable growth that benefits all, it is essential that the country improve access to health services and undertake infrastructure development in isolated rural areas. It also has to act to ensure that water and energy resources are sustainably managed.

The study is based on a proven methodology which dates back to 2005 and developed by Ricardo Hausmann, Dani Rodrik and Andrés Velasco to establish a growth diagnostic for developing countries, using a new economic reform approach. This methodology analyses evolutions and the structural characteristics of the economy but does not take account of recent developments and the dynamics of reforms. 

This report was officially launched on February 25, 2015 at Rabat Conference Centre. AfDB president Donald Kaberuka participated in the event alongside the Head of the Government of Morocco, Abdelilah Benkirane, and the Ambassador of the United States of America to Morocco, Dwight Bush, among others.