Unsurprisingly, the latest figures from the High Commission for Planning (HCP, Haut commissariat au plan) paint a bleak picture of the labor market in Morocco, with a declining labor force participation rate of 44% and an increasing unemployment rate of 13.1% in the second quarter of 2024. This rate remains higher among young people aged 15 to 24 (36.1%), graduates (19.4%), and women (17.7%).
Two weeks earlier, the institution led by Ahmed Lahlimi unveiled its growth projections, which are not expected to exceed 3% this year, after standing at 3.4% in 2023. This is a disappointing diagnosis for a government that promised the creation of 200,000 jobs annually, along with 4% economic growth. But can we still overcome this deadlock and hope to reverse the trend? Economists interviewed by TelQuel answer affirmatively, but with two conditions: be patient and make courageous decisions.
The root of the problem
Before delving into remedies, it is crucial to identify the root causes of the issues. According to Nabil Adel, Director of the Geopolitical and Geoeconomic Research Group at ESCA School of Management, the prevailing interpretation of economic aggregates is “distorted” as it does not take into account the “structural” problems of the Moroccan economy. This economist argues that the surge in unemployment and the slowdown in growth are not solely due to successive years of drought, the impacts of the COVID-19 years, or the recent inflation crisis—arguments often cited by political leaders to explain the current situation.
The problem is more profound and would require fundamental reforms to address it. “We have not yet resolved our structural problems, which makes short-term economic policies ineffective. Regardless of the employment or growth support programs the government implements, they will have no impact until the necessary reforms to address the fundamental challenges of the economy are put in place,” he asserts.
The first obstacle is the predominance of the public sector in the national economy. According to Nabil Adel, the weight of the public sector has increased from about 20% of GDP in the 2000s to nearly 33% currently, limiting the maneuvering space for the private sector, which is the primary provider of jobs in the country but is increasingly struggling. According to a recent study by the consulting firm Inforisk, no fewer than 7,659 legal entities were forced to shut down in the first half of 2024, an increase of 14% compared to the same period last year. Specifically, microenterprises are the largest contributors to this figure, accounting for 99.3% of the failing businesses, followed by SMEs (0.6%) and, to a lesser extent, large enterprises (0.1%).
“We are hindered by a system that produces regulations and standards that stifle private initiatives. The funds mobilized by the state are resources taken away from the private sector, which is crucial for creating value and jobs. Unlike the private sector, which is driven by profitability and the fear of bankruptcy, the public sector is not required to be profitable, often leading to less effective returns on public investments.”
Lack of vision
The same observation comes from Driss Effina, an economics professor at the National Institute of Statistics and Applied Economics (INSEA). According to this economist, it is the private sector that should drive growth, rather than the state. Local businesses have failed in this regard due to inadequate support policies. Driss Effina refers to the new investment charter implemented last year, which aims to reverse the proportion of private and public investment in the national economy. This charter provides for a series of direct subsidies to companies, up to 30% of the investment amount, depending on the sector of activity.
“The major problem is that we are managing the country with technocratic visions that lack economic depth.”
“This mechanism did not have the expected effect because it lacked economic depth. We prioritized granting subsidies to certain categories of businesses instead of improving the overall business climate for the entire ecosystem. We neglected to reduce taxation to stimulate the economy and support SMEs, which represent over 90% of the national entrepreneurial fabric, and now we are facing record rates of bankruptcy and unemployment,” he points out.
And he insists: “The major problem is that we are managing the country with technocratic visions that lack economic depth. How is it that there are no economists among the ministers, only engineers? We only call upon economists as a last resort, and even then, their recommendations are not taken into account.”
Lack of productivity
Another challenge identified by economists, which hampers the development of the Moroccan economy and prevents the creation of value and jobs, is the level of productivity, which has been declining for several years. This issue was highlighted by the World Bank in a report published on July 18, which pointed out the “low” labor productivity in the country, particularly in industry and services.
According to the Bretton Woods institution, although total labor productivity in Morocco increased by 55.7% between 2000 and 2019, this rise is mainly attributed to the agricultural sector, where productivity grew by 152%. This dependence on agriculture weakens the national economy, which remains vulnerable to climatic uncertainties, especially considering that the current unemployment rate is primarily due to job losses in rural areas (141,000 between the second quarter of 2023 and that of 2024).
“If we do not modernize our industry on a very large scale, we will not create wealth or jobs.”
« To increase productivity, we need to create and export innovative products that are different from the competition, with added value. Producing and selling watermelons is something everyone knows how to do. If we do not modernize our industry on a very large scale, we will not succeed; we will not create wealth or jobs,” explains Nabil Adel. He adds: “We made a mistake by promoting the policy of national preference. Instead of encouraging businesses to work harder and innovate to compete internationally and tap into a market of 2 billion consumers, we pushed them to remain confined to a market of 35 million people with low purchasing power. It’s a vicious cycle that we absolutely need to break. »
Escape the trap
To escape this vicious cycle, there is no magic recipe. The two economists interviewed by TelQuel stress the need to make “courageous” decisions, which can sometimes have “unpopular” effects.
“Unfortunately, we have not managed to have a government that has the courage to make strong decisions to set the country on the right track. Growth figures from one semester to another or from one year to another are meaningless as long as the structural problems are not addressed. Even growth at 5% or 6% is not sufficient to trigger the economic rebound needed to escape the trap of middle-income countries. We need to achieve this level of growth for at least ten consecutive years. Otherwise, it’s just a catch-up effect,” insists Nabil Adel.
By “strong decisions,” this economist refers to a correction of public finances by limiting state investments to value-creating and job-creating projects, while supporting the private sector to provide businesses with sufficient leeway to innovate, invest, and hire. It also involves tackling critical issues to ensure long-term economic and social stability, including pension reform, social security funds, labor laws, and taxation.
“We need a statesman who does not care about his popularity or the record of his term, as the results of structural reforms only become apparent in the long term… Unfortunately, the government has shown a lack of resilience. Several times, it has yielded to union demands even though state finances could not support it. Granting indiscriminate raises will not solve the problem of unemployment and growth; it merely temporarily soothes social anger and stimulates consumption without creating wealth,” he concludes.
Written in French by Safae Hadri, edited in English by Eric Nielson
