The Moroccan private sector’s potential for further growth

Although the Kingdom has undertaken numerous reforms to boost its private sector, progress remains slow in terms of productivity gains, according to an IFC study.

Morocco stands at a decisive turning point in its economic transformation. The strength of its institutions, the momentum of the reforms underway and the clarity of its strategic vision are creating favourable conditions for mobilising private investment in high value-added sectors. This is the conclusion of a country study by the International Finance Corporation (IFC), the World Bank’s private sector arm.

The study does not hide the fact that the Kingdom has fallen behind in some areas. Notably in terms of productivity gains: between 2016 and 2019, labour productivity in Morocco’s business sector increased by an average of 2.2% per year, a rate lower than that of comparable countries such as Vietnam, Poland and Malaysia during periods of structural transformation. At this rate, it will take Morocco more than thirty years to double its productivity gains, whereas countries with comparable growth rates have done so in twenty years.

The analysis examines, sector by sector, how targeted reforms can translate Morocco’s national strategies into concrete results in terms of competitiveness and job creation. It concludes with a series of recommendations to mobilise large-scale investment. Given that “these actions must be implemented in a coordinated manner — in the fields of energy, industry, the environment and territorial development — and be reinforced by broader institutional and financial measures”.

In any case, building on these achievements, the country has embarked on a new phase of its development, the analysis explains. These frameworks place private investment at the heart of Morocco’s growth vision, with a renewed focus on job creation, human capital development, territorial equity and the green transition, notably through the objective of increasing private investment to two-thirds of total national investment by 2035.

Insufficient job creation

Morocco’s economic transformation has been underpinned by significant public investment in infrastructure, logistics and renewable energy. However, private investment has not yet reached the scale required to sustain high growth and absorb the expansion of the labour force. “While investment rates remain high by regional standards, their composition remains largely skewed towards public spending, with private investment accounting for only around one-third of total investment,” the study states.

Job creation has fallen short of requirements, with limited productivity growth and persistent informality in several sectors. Consequently, removing the constraints that hinder private investment is essential to support inclusive growth and enable Morocco to achieve its ambitious goals for job creation and development.

The analysis, therefore focuses on four key sectors in Morocco. These sectors benefit from preferential access to European Union (EU) markets, “which represents an opportunity for all sectors and the economy as a whole, far beyond the textile sector alone, shaping demand across several value chains”. The report thus focuses on decentralised solar energy production, which can help provide affordable clean energy to sectors such as textiles and agribusiness, thereby reducing production costs and promoting decarbonisation. “Low-carbon textiles can utilise renewable energy and circular production models, thereby boosting exports and green jobs.” For its part, the argan oil and natural cosmetics sector harnesses the strengths of Morocco’s biodiversity and rural workforce, creating income opportunities for women in less developed regions. Marine aquaculture, meanwhile, can help diversify coastal economies, improve food security and contribute to the emergence of the blue economy. “Taken together, these sectors illustrate how private investment can support Morocco’s transition towards a green and territorially balanced growth model,” explains the IFC.

Potential gains in solar energy

However, these sectors continue to face “lengthy and complex administrative procedures, delays in implementing supporting legislation, and fragmented institutional coordination”. These constraints are exacerbated by skills shortages that limit companies’ ability to move upmarket and adopt new technologies across several sectors. Furthermore, “gaps in technology adoption and digital infrastructure also limit companies’ ability to innovate and remain competitive”.

For example, in solar energy, high unit electricity costs for commercial and industrial consumers further enhance the appeal of decentralised solutions. However, “the deployment of these solutions remains relatively modest compared to the country’s potential, suggesting an opportunity for policy action”, the study explains. The development of decentralised solar power generation through Power Purchase Agreements (PPAs) and self-consumption schemes would enable clean and competitive energy to be offered to industrial and commercial users, whilst stimulating investment in new technologies. The potential is particularly high in industrial zones and manufacturing hubs where energy costs remain a constraint on competitiveness.

And yet, the analysts lament, “certain regulatory and institutional constraints are holding back private investment”. The legal and regulatory framework remains incomplete and fragmented, creating uncertainty regarding procedures, tariffs and the handling of surplus energy. This situation is exacerbated by the lack of clear technical and commercial rules for feeding electricity into the grid, thereby preventing producers from monetising surplus generation. Administrative complexity also constitutes a major obstacle, whilst distributors’ financial concerns—particularly regarding revenue loss due to self-consumption and risks to grid stability—contribute to resistance to the integration of decentralised solar energy. The IFC goes on to detail how to remove these barriers.

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