Economic overview
During 2020, the effects of the pandemic on the Moroccan economy translated into a contraction in growth of over 7%, due to the combined effect of the drop in exports and the reduction in domestic demand, aggravated for the second consecutive year by drought. In 2021, the national economy showed strong signs of recovery, recording +7.9%, also supported by government stimulus measures and the successes of the vaccination campaign. However, the joint effect of the severe drought that hit the Kingdom and the impact of the war in Ukraine on the prices of raw materials and energy led to a revision of growth estimates with a slowdown to 1% in 2022.
At the end of the first half of 2022, the labor market recorded an unemployment rate that fell from 12.8% to 11.2% at a national level, from 18.2% to 15.5% in urban areas and from 4, 8% to 4.2% in rural areas. It is higher among young people aged between 15 and 24 (30.2%), university graduates (18%) and women (15.1%).
The country’s economy is generally characterized by a large degree of openness to international trade. The latest data from the Office des Changes for 2021 show an increase in commercial transactions of 24.8% compared to 2020 and 10.4% compared to 2019. This growth is jointly supported by imports (+24.7%) and exports (+25%). The increase in imports is mainly driven by the invoice for energy products, whose imports increased by 51.9%; for exports, on the other hand, the growth of exports of phosphates and derivatives continued, registering +57.8%. According to the latest UNCTAD report, FDI flows to Morocco also grew by 52% in 2021 compared to the previous year, in total contrast with the rest of North Africa.
Morocco remains committed to consolidating its role as a gateway to Africa, confirming itself among the leaders of investment in the continent. The Kingdom is a party to 56 free trade agreements and has consolidated its positions in West and Central Africa over the years and launched new partnerships in the eastern region of the continent.
Main sectors of economy
The service sector accounts for just over half of GDP, and industry, made up of mining, construction and manufacturing, is another quarter. The sectors that have recorded the highest growth are the tourism, telecommunications and textile sectors. Morocco, however, still depends on agriculture. The sector accounts for only around 14% of GDP but employs 40-45% of the Moroccan population. With a semi-arid climate, it is difficult to ensure good rainfall and Morocco’s GDP varies according to the weather.
The country’s economic system has many facets. It is characterized by a large opening towards the outside world. France remains Morocco’s main trading partner (supplier and customer). France is also the largest foreign lender and investor in Morocco.
Since the early 1980s, the Moroccan government has followed an economic program to accelerate real economic growth with the support of the International Monetary Fund, the World Bank and the Paris Club of creditors. The country’s currency, the dirham, is now fully convertible for current account transactions; financial sector reforms were implemented and state-owned enterprises were privatised.
The main resources of the Moroccan economy are agriculture, phosphates and tourism. Sales of fish and seafood are also important. Industry and mining contribute about a third of annual GDP. Morocco is the world’s third largest producer of phosphates (after the United States and China) and fluctuations in the prices of phosphates on the international market greatly affect the economy of Morocco. Tourism and workers’ remittances have played a crucial role since independence. The production of textiles and clothing is part of a growing manufacturing sector which in 2002 accounted for about 34% of total exports, employing 40% of the industrial workforce.
Taxation for businesses in Morocco
The taxation of natural persons
As far as taxation on natural persons is concerned, the income tax (Impôt sur le revenu, Ir) affects income from employment and similar, income deriving from professional activities, income deriving from carrying out agricultural activities, capital and capital gains deriving from real estate sales and land income.
The tax is levied on natural persons, limited partnerships and de facto companies that do not opt to be subject to corporation tax. It affects worldwide income only for residents of Morocco. In this regard, natural persons who stay in the country for a period, even non-continuous, exceeding 183 days per year are considered residents in Moroccan territory.
Taxable income is subject to progressive rates in brackets ranging from total exemption for income not exceeding 30,000 Moroccan dirhams (MAD), to a maximum rate of 38% for income exceeding 180,000 dirhams. There are specific exemptions for certain categories of income. For example, as far as pensions are concerned, incomes not exceeding 168,000 dirhams per year are exempt from taxation for 55% of the amount; for 40% if this threshold is exceeded. The exemption extends to 80% if the pension income received by the resident is from a foreign source.
The taxation of legal persons
The corporate tax affects all income of companies and legal persons, including public institutions, while partnerships and real estate companies are excluded from its application. The tax is calculated by applying the 10% rate in brackets on a tax base of up to 300,000 dirhams; 17.5% on a tax base ranging from 300,001 dirhams to 1,000,000 dirhams; a rate of 31% for excess values. A higher rate of 37% applies to insurance companies and credit institutions. The payment of the tax takes place through the payment of four provisional advances equal to 25 of the amount paid in the previous year. Moroccan legislation also provides for the obligation to pay a minimum amount for each accounting year. This minimum amount, in any case not less than 1,500 dirhams, is calculated by applying a rate of 0.75% (0.25% for companies operating in specific sectors) on the revenues deriving from the activity. However, this contribution is not required for the first 36 months from the start of the activity.
Investing in Morocco
Morocco is looking far ahead and its government apparatuses are leaving nothing to chance. For several years now, many economic plans have been put in place aimed at promoting and supporting the development of the country.
Through these long-term plans, the institutions are willing to favor funding, infrastructure, access to credit and tax breaks in key sectors of the Moroccan economy.
It is therefore important to underline that foreign investors always have the necessary support and guarantees from Moroccan public bodies in order to protect their investments and their assets.
INDUSTRY
Diversify and expand, these are the priorities that the government has set itself for the growth of the Moroccan industrial fabric.
With the establishment of the “Industrial Investment Fund” of 2 billion euros, the plan also supports the transition of informal sectors towards the formal economy with incentives and fiscal measures.
The flagship ecosystems of Morocco’s “Industrial Acceleration” plan are:
Automotive Morocco today is the second largest car manufacturer in all of Africa thanks to the presence of major brands such as Renault, Peugeot and Yazaki which have opened their offices in the free zone areas.
Aeronautics In just 12 years, 120 companies have started operating in the sector, including major engineering brands. Morocco offers quality facilities and encouraging incentives.
Pharmaceuticals and Chemicals This sector has experienced exponential growth over the past 10 years. In terms of company size and turnover, Morocco is the third largest country on the continent in this market.
Textile and leather The packaging activity for European fashion companies is highly developed, especially in the prêt-à-porter sector.
Offshoring The activities mainly concern the Business Process Outsourcing (BPO) and Technology Outsourcing (ITO) sectors. In 2012 Morocco was named best offshore destination.
AGRI-FOOD
The agricultural sector is one of the most important in the entire Moroccan economy, in fact it contributes 13% to the GDP and employs 40% of the national workforce.
The Maroc Vert plan was conceived to improve the entire agricultural sector and to modernize the system, through investments of the order of 1 billion euros a year.
This process of innovation and evolution of cultivation techniques requires advanced tools and services suitable for local environmental situations.
RENEWABLE ENERGY
In a context of global energy crisis and instability of the raw materials market, Morocco has launched a great challenge by betting everything on green resources.
The construction of the largest solar plant in the world is underway. Morocco has set up development plans for solar, wind and hydroelectric energy.
The primary goal is to be able to cover 52% of national electricity needs through renewable energy by 2030.
Incentives in this field have attracted investors from all over the world with international tenders.