Further reforms would accelerate Morocco’s convergence to the advanced economies

by Margit MOLNAR, Michael ABENDSCHEIN, Taoufik ABBAD, Abdenbi EL ANSARY, Peter JARRETT, Kyongjun KWAK, Badr LAZRAK, Cyrille SCHWELLNUS, and Jen-Hsuan (Paul) YU

Morocco’s prudent macro-economic management has ensured stability and a swift recovery following recent shocks. Labour productivity has been increasing and FDI flows have been strong. Morocco has embarked on major reforms to encourage investment and to enhance social protection, but a stronger convergence path will be needed.

The labour productivity gap relative to the United States remains relatively large (Figure 1). Morocco has successfully attracted major global value chains in the automative and aeronautics industries, but their linkages could be strengthened. Local value-added remains focused on less sophisticated activities. Widespread informality and small firm sizes set back productivity growth. Investment is being boosted by government incentives under the new Charte de l’Investissement.  Ensuring that investment incentives are balanced between new and established sectors would help broaden the industrial base. Continuing efforts to tackle corruption and making further progress to move transactions online would reduce the scope for corruption and boost efficiency.

Figure 1. The labour productivity gap is large
Percentage gap with respect to the USA in GDP per person employed, 2022

Note: In constant 2017 PPP $.
Source: OECD calculations based on World Bank World Development Indicators database.

Major reforms are under way to extend social insurance and tackle widespread informality (Figure 2) that leads to low wages, poor-quality jobs and weak skills. An integrated approach is needed to improve incentives for workers and businesses to formalise and strengthen enforcement and sanctions over time. Lowering social contribution rates for low-income workers, taking into account the impact on formalisation when setting the minimum wage and easing strict employment protection legislation would help.

A range of measures including better access to finance, reducing discrimination and tackling gender stereotypes would help boost female activity rates that are currently low and falling. Extending subsidised childcare to children of younger ages would work in the same direction. Youth unemployment is high, including for new graduates. Streamlining the range of active labour market policies and strengthening activation requirements would help young people to find work. 

Figure 2. Informality is widespread
Share of informal employment

Source: ILO Labour Force Statistics; Haut-Commissariat au Plan.

Improving skills remains key to raising productivity and living standards. While education outcomes have improved, a significant share of the adult population left school at a young age and performance at school level in international tests continue to lag other countries. A major reform of the school system is underway and continued efforts are needed to train adult and young people.

References

OECD (2024), Economic Survey of Morocco, OECD Publishing, Paris, https://www.oecd.org/en/publications/oecd-economic-surveys-morocco-2024_80777ea7-en.html