Economic Risks
Record Unemployment Rate:
Morocco’s latest census reveals a troubling rise in unemployment to 21.3%. This surge results in lost economic output, higher dependency ratios, and strained public finances, slowing economic growth. Socially, unemployment contributes to exclusion, mental health issues, and delays in independence and family formation, increasing poverty. Unemployment fuels disillusionment, risking social unrest and political radicalization, leading to the phenomenon of “brain drain” – the emigration of skilled individuals – exacerbating demographic challenges and undermining long-term economic prospects by diminishing the country’s competitiveness.
Rising Living Costs:
As Morocco faces economic challenges, citizens are increasingly burdened by the rising cost of living. Inflation, driving up the prices of goods and services, is a major factor. With salaries among the lowest in the region, the slow wage increases are insufficient to keep pace with soaring prices, placing a heavy strain on Moroccan households. By the fourth quarter of 2024, only 11.1% of families felt optimistic about saving in the coming year, while 88.9% saw no such possibility. The continued surge in essential commodity prices has deepened socioeconomic stress, fueling dissatisfaction and economic insecurity.
Fall in Agricultural Production:
Agriculture, which accounts for 12% of Morocco’s GDP and employs a third of the population, is highly vulnerable to climatic shocks, such as droughts, and fluctuations in global commodity prices. This dependence on agriculture exposes the economy to significant volatility, as poor harvests during adverse weather conditions can have a major impact on overall economic stability.
Trump Administration’s Protectionist Trade policy:
What Trump does on the Inflation Reduction Act (IRA) may also impact Morocco’s place on Washington’s map. The Moroccan economy has benefited from the IRA, which is based, among other things, on supplies from countries linked by free trade agreements with the United States. (Morocco has had a free trade agreement with the United States since January 2006.) With the IRA in place, Chinese companies have even turned toward Morocco, making investments there to maintain access to US markets. Meanwhile, for Morocco, it was a winning system that promoted job creation on its soil and technology transfers and strengthened its position as a key player in the green industry in Africa. But Trump working with the Republican-controlled Congress to repeal the IRA or restrict the policy could make Morocco less tempting for China, and thus result in fewer investments. In the event of growing tensions between the United States and China, Morocco could review its strategy of equidistance between these two powers.