- Real GDP growth is projected at 4.4 percent in 2026, supported by strong agriculture output and public infrastructure investment. Scaling up public investment offers opportunities for stronger growth and job creation provided risks are well managed and human capital is strengthened.
- Continued revenue performance together with reprioritization of spending would create space for priority social spending and accelerate the rebuilding of fiscal buffers.
- Sustainable job creation remains a pressing priority, and calls for a more dynamic private sector, leveling the playing field between public and private entities, and further reforms in the labor market.
Washington, DC: On March 20, the Executive Board of the International Monetary Fund (IMF) concluded the 2026 Article IV consultation[1] with Morocco and completed the Mid-Term Review under the Flexible Credit Line Arrangement (FCL), which was approved on April 2, 2025 (see PR 25/085). The authorities have consented to the publication of the Staff Report prepared for this consultation.[2]
Real GDP growth in 2025 accelerated to an estimated 4.9 percent, supported by a rebound in agricultural output and a surge in large-scale infrastructure projects. Nonetheless, high unemployment remains a significant challenge. Average inflation remained low at 0.8 percent, allowing Bank Al-Maghrib to maintain a neutral policy stance after earlier rate cuts. The current account widened to 2.1 percent of GDP as imports rose with investment, partly offset by buoyant tourism. Strong revenue performance facilitated a smaller than anticipated overall fiscal deficit at 3.5 percent of GDP, despite higher than budgeted spending on public investment and transfers for state-owned enterprises.
Looking ahead, the growth outlook remains strong, supported by robust domestic drivers. Real GDP growth is projected at 4.4 percent for 2026, 4.5 percent for 2027, and 4 percent over the medium term, assuming normalized agriculture production and continued infrastructure investment with greater private sector participation. The growth outlook in the near term is dampened by the ongoing conflict in the Middle East, which affects Morocco mainly through disruptions to global commodity markets and weaker global demand amid heightened global uncertainty. Inflation is expected to rise temporarily during the year from its currently low levels, mainly reflecting higher energy prices, before settling at around 2 percent over the medium term. Given the high import content of infrastructure investment and higher cost of commodity imports, the current account deficit is expected to widen moderately. International reserves levels are expected to remain adequate. The overall fiscal deficits for 2026 and the medium term are consistent with a gradual reduction in debt to GDP to 60.5 percent by 2031.
Risks to the outlook have increased on the downside amid high external uncertainty. External risks to the outlook include increased commodity price volatility amid global uncertainty and the ongoing conflict in the Middle East, as well as higher trade barriers and global supply chain disruptions that could weigh on activity in the Euro Area. Domestically, the main risk arises from weaker-than-expected economic gains from the implementation of public infrastructure investment, which would result in subdued growth and employment. If downside risks were to materialize, available policy space together with the FCL would help the economy adjust smoothly.
Executive Board Assessment[3]
Executive Directors agreed with the thrust of the staff appraisal. They highlighted that Morocco’s strong fundamentals and track record of very strong policies and policy frameworks have been instrumental to the resilience of the economy and to strengthened market confidence. In the face of heightened external uncertainty and global geopolitical tensions, including the ongoing conflict in the Middle East, Directors noted Morocco’s ample buffers to address the estimated shocks, while the Flexible Credit Line (FCL) arrangement continues to provide an important precautionary buffer. Directors underscored the importance of maintaining sound macroeconomic policies and advancing structural reforms to support economic growth and job creation.
Directors commended Morocco’s strong revenue performance and gradual rebuilding of fiscal buffers. They encouraged saving at least part of any revenue overperformance and supported further revenue measures and rationalization of unproductive spending to create additional space for priority social spending and possibly accelerate debt reduction. They welcomed the authorities’ commitment to implement a medium‑term debt‑anchored fiscal rule and recommended further enhancements to public financial management, including greater quantification of fiscal risks in the Medium‑Term Fiscal Framework.
Directors noted that higher public infrastructure spending will raise productivity, emphasizing that fully reaping the benefits requires further investment in human capital and careful risk management. Directors called for concerted progress on state‑owned enterprise reform and strengthening public investment management to mitigate fiscal risks. They encouraged accelerating implementation of health and education strategies to help sustain the growth momentum and ensure that benefits are widespread.
Directors supported Bank Al‑Maghrib’s (BAM) neutral monetary policy stance and agreed that future policy rate decisions should continue to be data dependent. Recognizing BAM’s strong track record of credible monetary policy conduct, Directors encouraged continued transition to greater exchange rate flexibility and a full‑fledged inflation‑targeting framework, with clear communication on sequencing and priorities between policy objectives. Some Directors emphasized that the use of dual nominal anchors should only be a temporary arrangement.
While noting that systemic risks are limited, Directors encouraged further strengthening the financial systems’ resilience to emerging risks. Banks’ increased public sector financing and concentration risks warrant enhanced monitoring. Directors commended the carefully sequenced NPL reforms and encouraged timely operationalization of the secondary NPL market. Directors supported further strengthening the macroprudential framework to ensure sustainable credit growth with well‑managed risks.
Directors welcomed the authorities’ efforts to support job creation particularly for youth and women, including assistance offered to small and medium enterprises and startups, and the implementation of a comprehensive jobs plan. They emphasized that sustainable job creation requires reforms that foster a more dynamic private sector, improve labor market responsiveness, and promote market neutrality between the public and private sectors. They also recommended continuing competition reforms and the fight against corruption. Strengthening the resilience of agriculture and addressing water scarcity will also be important.
Directors agreed that Morocco continues to meet the qualification criteria for the FCL, given its very strong macroeconomic policies and institutional policy frameworks and its sustained track record of implementing very strong policies. They considered that maintaining the current level of access is appropriate. They noted the authorities’ intention to continue treating the arrangement as precautionary and to gradually exit it, depending on the evolution of external risks.
It is expected that the next Article IV consultation with Morocco will be held on the standard 12‑month cycle.
READ MORE: https://www.imf.org/en/news/articles/2026/03/25/pr26089-morocco-imf-concludes-2026-aiv-consultation-and-mid-term-rev-under-fcl-arrangement
