Unleashing Morocco’s Private Sector: A Blueprint For Sustainable Growth And Job Creation – OpEd

The World Bank recently released a comprehensive report on Morocco's economic situation, aptly titled "Unlocking the Potential of the Private Sector to Stimulate Growth and Job Creation." This report underscores the critical role the private sector can play in driving economic growth and generating employment opportunities in Morocco.

As Morocco navigates the post-pandemic landscape, the nation stands at a critical juncture. Despite the challenges of a global economic slowdown, an inflationary shock, and the devastating earthquake in Al Haouz province, the resilience of Morocco's economy has been nothing short of remarkable. However, to secure long-term prosperity and inclusive growth, it is imperative to unlock the potential of Morocco's private sector.

In 2023, Morocco's GDP grew by an impressive 3.4 percent, driven by a resurgence in tourism, the strength of export-oriented manufacturing sectors such as automotive and aerospace, and a rebound in private consumption. These successes are promising, but they mask deeper structural issues that need to be addressed to sustain this momentum.

One of the most striking indicators of Morocco's economic potential is the surge in foreign direct investment (FDI) announcements. These projects not only reflect international confidence in Morocco's economic stability but also offer significant development opportunities. The post-pandemic boost in capital-intensive industries is transforming the structure of Moroccan exports, making them increasingly complex. Furthermore, the current account deficit has decreased to its lowest level since 2007, underscoring the robustness of Morocco's external sector.

Macroeconomic policies have been pivotal in supporting growth. The Moroccan government's expansion of the public sector post-pandemic has helped sustain overall demand, even during recent shocks. Strong public revenue performance and controlled spending have enabled a reduction in the budget deficit. Yet, innovative financing operations, such as sale and lease-back strategies, while effective in the short term, create future payment obligations and are not a sustainable long-term solution. Bank Al-Maghrib's prudent response to the recent price shock has led to a relatively rapid disinflation process, indicating effective management.

Yet, the recovery remains uneven. Moroccan businesses and households are still struggling to recover from recent challenges. The rise in business bankruptcies and the disappointing labor market performance—marked by the loss of nearly 200,000 jobs in rural areas in 2023—highlight the fragility of this recovery. While per capita consumption has barely returned to pre-pandemic levels, the government's new direct social assistance program promises significant relief for the poorest households.

Looking ahead, Morocco's economy is expected to slow slightly in 2024, with growth projected to fall to 2.9 percent due to a poor agricultural season. This anticipated slowdown underscores the need for a diversified economic base that is less dependent on agricultural performance. However, the non-agricultural GDP is expected to remain resilient, supported by recovering domestic demand and a stronger industrial sector. Growth is projected to accelerate from 2025, assuming a normal agricultural season, with the current account deficit widening slightly but the budget deficit gradually returning to pre-pandemic levels.

To sustain and amplify this growth, Morocco must focus on empowering its private sector. A special chapter in the latest economic report highlights the challenges and opportunities within the Moroccan private sector. Despite its critical role in the economy, private sector productivity has been disappointing, primarily due to inefficiencies in resource allocation. Large companies tend to be less productive than their smaller counterparts, indicating that market dynamics do not sufficiently reward efficiency and innovation.

Moroccan SMEs, in particular, face significant growth barriers. The density of high-growth firms remains very low, which is problematic as these firms typically contribute disproportionately to job creation. Addressing the constraints faced by the private sector—such as access to finance, regulatory hurdles, and market access—could unleash a wave of entrepreneurial activity and innovation.

The private sector's transformation requires a multifaceted approach. First, improving access to finance for SMEs and startups is crucial. This can be achieved through financial reforms that encourage lending to smaller enterprises and the development of alternative financing mechanisms. Second, regulatory reforms are needed to reduce the bureaucratic burden on businesses and create a more conducive environment for entrepreneurship. Finally, fostering a culture of innovation through targeted support for research and development can help Moroccan firms compete on a global scale.

Empowering the private sector is not just an economic imperative; it is a social one. By creating jobs and fostering inclusive growth, a vibrant private sector can contribute to reducing inequality and improving living standards for all Moroccans. The journey towards shared prosperity hinges on our ability to harness the potential of our private enterprises.

In conclusion, Morocco has shown remarkable resilience in recent years, but the path to sustained and inclusive growth lies in unlocking the potential of the private sector. By addressing structural challenges and creating a more supportive environment for businesses, Morocco can ensure its economic recovery is robust, sustainable, and inclusive, driving growth and job creation for years to come. The time to act is now, and the opportunity is immense.