Morocco maintains Ba1 credit rating amidst economic challenges

Morocco’s credit rating remains stable at Ba1, as confirmed by Moody’s during its latest review. This rating reflects a complex landscape of strengths and vulnerabilities, highlighting effective governance and a robust domestic financing structure, contrasted with low income levels and risks within the public and banking sectors.

Despite rising debt levels, Morocco has successfully maintained social cohesion and economic support amid recent adversities. The country's economic growth decelerated to 2.6% in 2024, down from 3.4% in 2023, largely due to unfavorable rainfall impacting agricultural productivity. However, analysts anticipate a recovery to 3.5% growth in the medium term, driven by ongoing structural reforms.

The fiscal picture shows a budget deficit of 4.3% of GDP, slightly better than the anticipated 4.5%, attributed to unexpectedly strong tax revenues. Meanwhile, the current account deficit has stabilized at 2.5% of GDP, bolstered by tourism, exports, and significant remittances from Moroccans living abroad.

Morocco faces persistent structural challenges, including low per capita income and vulnerability to climate-related risks, which continue to hinder its economic outlook. Nonetheless, the country is witnessing gradual growth in higher-value industries, supported by a solid institutional framework and disciplined monetary and fiscal policies, earning it a Baa2 governance score.

The reliance on public sector activities and foreign currency debt, currently at 17.6% of GDP, presents ongoing challenges. While the banking sector remains stable, it shows signs of vulnerability related to credit concentration and international exposure.

Moody’s stable outlook reflects confidence in Morocco’s capacity to navigate economic pressures. The agency notes that successful implementation of economic and social reforms could bolster resilience and debt sustainability. Conversely, increasing public spending, particularly on infrastructure and social initiatives, may pose challenges to fiscal stability.

To achieve an improved credit rating, Morocco must focus on enhancing non-agricultural growth, creating formal job opportunities, and addressing inequalities. Conversely, a rising debt burden, particularly from public sector commitments, could negatively impact future evaluations.