IMF Staff Completes 2025 Article IV Consultation with Morocco

IMF News, February 10, 2025

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IMF staff team led by Roberto Cardarelli conducted discussions with the Moroccan authorities in Rabat on the 2025 Article IV Consultation from January 27 to February 7.
End-of-Mission press release dated February 10, 2025.
The statement conveys preliminary findings of IMF staff and does not necessarily represent the views of the IMF’s Executive Board.

Economic activity is expected to have grown by 3.2 percent in 2024.
Economic activity is expected to accelerate to 3.9 percent in 2025 as:
- agricultural output rebounds after recent droughts, and
- the nonagricultural sector continues to expand at a robust pace amid strong domestic demand.
Higher growth is expected to increase the current account deficit towards its estimated medium-term norm of around 3 percent.
Inflation is expected to stabilize at around 2 percent.
Risks to the outlook are broadly balanced, with significant uncertainty regarding the economic impact of geopolitical tensions and changing climate conditions.

Inflation expectations are anchored around 2 percent with little signs of demand pressures.
The current broadly neutral monetary policy stance is appropriate.
Staff agrees with Bank Al-Maghrib that future changes of policy rates should remain data dependent.
Recommendation: With inflation back to around 2 percent, Bank Al-Maghrib should continue its preparation to adopt an inflation-targeting framework.

Recent reforms to the tax system and tax administration have helped expand the tax base while lowering the tax burden.
Tax revenues in 2024 have been greater than expected.
Central government’s deficit for 2024 was 4.1 percent of GDP compared to the 4.3 announced in the 2024 Budget.
The 2025 Budget confirms the gradual pace of fiscal adjustment projected last year.
Recommendation: Higher-than-expected revenues should be used to accelerate the pace of debt reduction to levels closer to pre-pandemic.
Recommendation: Continue financing structural reforms while making further efforts to expand the tax base and rationalize spending, including by reducing transfers to state-owned enterprises as part of the ongoing reform of the sector and expanding the use of the Unified Social Registry to all social programs.

Staff welcomes the ongoing reform of the Organic Budget Law that should introduce a new fiscal rule based on a medium-term debt anchor.
Good progress has been made in the Medium-Term fiscal framework to include an assessment of the risk from climate change.
Recommendation: Authorities should build on this progress by adding more information on the impact of new policy measures and a quantification of the risks from the increased reliance on public-private partnership (PPP) projects.

Structural reforms should focus on strengthening job creation by:
- better targeting active labor market policies, with special focus on labor displaced from the agricultural sector due to the sequence of droughts;
- consolidating programs to support small and medium firms;
- removing regulatory distortions that hinder firms’ growth.
Staff welcomes the progress in the operationalization of the Mohammed VI Investment Fund that should help SMEs access equity financing.
Policy recommendations to encourage private sector development:
- Strengthen the support for SMEs under the new Charter of Investment.
- Strengthen regional investment centers so they can better help SMEs access financial and technical resources needed for their growth.
- Review the labor code, tax system, and regulatory and governance frameworks to remove distortions that incentivize firms to remain small or informal.
- Ensure ongoing SOE reform effectively pursues market neutrality between public and private sector firms.

The IMF team held discussions with senior officials of the government of Morocco, Bank Al-Maghrib, and representatives of the public and private sectors.
The team thanks the Moroccan authorities and other stakeholders for their hospitality and candid and productive discussions.

IMF Staff press statement, February 10, 2025.