To strengthen its private sector and address the needs of an expanding workforce, Morocco needs to implement significant structural changes, as stated in a recentWorld Bank report.
Even though Morocco has experienced consistent economic expansion recently, the report indicates that the country’s private sector continues to lag behind, characterized by minimal business activity and slow improvements in efficiency. These observations have been made against the backdrop of forecasts suggesting that around 300 million youths within the Middle East and North Africa (MENA) area will enter the job market by 2050.
In Morocco, only 6% of businesses are newly registered each year, compared to 11% in countries such as Colombia. Exit rates are similarly low, between 6% and 8%, reflecting weak market dynamism and limited competition.
The report indicates that “the private sector lacks sufficient dynamism,” noting meager annual productivity growth of only 2.2%, which falls short of the nation’s potential considering its existing infrastructure and skilled workforce.
The World Bank cautions that less efficient businesses linger in the marketplace for extended periods when they ideally shouldn’t, whereas more productive enterprises find it difficult to expand. This leads to an improper distribution of resources, which hampers general economic growth.
Climate Change Along with Investment Risks
Exacerbating these issues are the impacts of climate change. Droughts—which are assessed through variations from typical precipitation patterns—can decrease business revenues by as much as 40% and diminish labor efficiency by around 42%. A significant portion of this decline can be attributed to the extensive use of seasonal employees who tend to have poorer attendance and output when faced with severe weather events.
Droughts also undercut private investment. In the aftermath of severe dry spells, the share of firms planning to invest falls by nine percentage points. The reasons include reduced revenues, increased debt, and tighter access to credit, with rising interest rates reflecting higher financial risks.
Data Gaps and Labor Market Tensions
Although Morocco has carried out an extensive economic survey—which is uncommon in this part of the world—the document emphasizes the ongoing necessity for increased data openness and accessibility. Better information might assist government officials in thoroughly examining market patterns and formulating more efficient policy changes.
Another persistent issue is the tug-of-war over talent between the public and private sectors. Around 8.25% of Moroccan workers are employed in government jobs, a figure lower than Iraq or Djibouti but still enough to create a “brain drain.” Public sector positions offer greater stability and benefits, pulling skilled workers away from private firms that need them to grow.
A New Role for the State
Ultimately, the World Bank urges Morocco to rethink the role of the state—not as a market player, but as a facilitator. That includes fostering a more competitive business environment, improving access to finance for small and mid-sized enterprises, and expanding opportunities for women and youth.
“The path forward lies in empowering the private sector,” the report concludes, “to unlock growth and provide meaningful employment in a changing economy.”
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World Bank: Morocco’s private sector lags despite economic progress
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