Morocco’s economy set for 5% growth in 2025 amid rising FDI and tourism boom

Tuesday 04 March 2025 - 10:50

By: Dakir Madiha

Morocco’s economy set for 5% growth in 2025 amid rising FDI and tourism boom

Morocco’s economy is forecasted to grow by 5.0% in 2025, up from 3.3% in 2024, despite challenges posed by a weak agricultural sector, according to a report by Fitch Solutions published on February 26.

This revised forecast, down from an earlier projection of 5.6%, reflects “emerging signs that agricultural production will fall below historical averages.” Nevertheless, Fitch Solutions describes the outlook as “notably optimistic,” surpassing the Focus Economics consensus of 3.9%.

The report highlights strong growth in non-agricultural sectors, driven by robust investments, Bank Al Maghrib’s accommodative monetary policy, and Foreign Direct Investment (FDI) inflows, particularly in Morocco’s automotive, aerospace, and renewable energy industries.

Investment and monetary policy as growth engines

Investment is expected to play a pivotal role in Morocco’s growth. Bank Al Maghrib, Morocco’s central bank, plans to maintain an accommodative monetary policy, with an additional 25 basis point reduction in the policy rate in 2025, following 50 basis points of cuts in 2024. This would bring the policy rate to 2.25% by the end of the year.

Lower borrowing costs are anticipated to stimulate private investment, with bank lending rates already at their lowest since Q1 2023, averaging 5.1% in Q4 2024.

The report also underscores Morocco’s strategic advantages, including its location, business-friendly environment, and infrastructure developments linked to its co-hosting of the 2030 FIFA World Cup with Spain and Portugal. These factors are expected to sustain high levels of foreign capital inflow, with net FDI increasing by 55.4% year-on-year in 2024.

Household spending, tourism, and trade

Private consumption is projected to remain robust in 2025, supported by several factors:

1- The government’s expansionary fiscal policy, which includes an 11.5% increase in expenditures on public-sector wages.

2- Low inflation, forecasted to average 1.6% in 2025, which will preserve consumer purchasing power.

3- Steady growth in remittances, bolstered by stronger economic growth in Europe, where over 80% of Moroccans abroad reside.

However, the agricultural sector, which employs nearly 30% of the workforce, is expected to underperform. This could keep unemployment around 13.3%, limiting gains in household income and purchasing power.

Net exports are anticipated to contribute minimally to growth. While stronger tourism and economic recovery in Europe (with growth rising from 1.3% in 2024 to 1.5% in 2025) will boost demand for Moroccan exports, this will be offset by higher agricultural imports and constrained agricultural exports.

Tourism, a key pillar of Morocco’s economy, is set to thrive in 2025. The hosting of the African Cup of Nations in December and robust European growth will increase tourist arrivals from 16.8 million in 2024 to 17.8 million in 2025.

Risks to growth

Despite the optimistic outlook, the report notes several risks that could impact Morocco’s economic trajectory:

- A weaker-than-expected agricultural season could sustain high unemployment and increase import dependency.

- Geopolitical tensions, particularly between Israel and Iran, may elevate oil prices, leading to inflationary pressures.

- Slower growth in Europe, potentially exacerbated by US trade policies, could reduce demand for Moroccan exports, particularly in the automotive and textile sectors.

Regarding US trade policies, the report highlights that Morocco is relatively insulated from potential disruptions in semiconductor trade, as exports of semiconductors to the US account for only 0.5% of Morocco’s total nominal exports and just 0.2% of GDP.

Despite these challenges, Morocco’s economic growth prospects for 2025 remain positive. The acceleration from 2024 levels will be driven by the non-agricultural sector, supported by strong FDI inflows, favorable monetary policies, and a thriving tourism industry.