Unemployment in Morocco further increased in Q2 2021, rising by 0.5% YOY to 12.8%. This was driven by an increase in urban unemployment from 15.6% to 18.2%. Household confidence remained weak in early 2021. Starting with confidence levels of 77.8% in 2019, then falling to a low of 61.2% in 2020, confidence remained a very weak 63% in Q1 2021. Meanwhile, inflation increased to 2.2% YOY in July. This was driven by a 2.8% increase in food prices and a 1.8% increase in non-food product prices. Transportation prices, which increased by 5.2%, were one of the key drivers of inflation.

Our View

Aided by a ~35% vaccination rate of the population and easing of restrictions, we expect the economy in Morocco to grow by 4.9% YOY in 2021 and 4.2% YOY in 2022. Growth will be bolstered by increasing tourism revenues, improved harvests, and higher public sector–led investment. However, major hurdles remain, such as prominent unemployment, particularly among young adults, and fragile household confidence because of the economic downturn. Additionally, the government’s gradual easing of restrictions means that recovery will only accelerate between Q4 2021 and Q2 2022. The Delta variant will further complicate economic recovery; Canada, France, and other EU countries have recently placed Morocco on the travel red-list, and this will dent the recovery of the tourism sector. Businesses should see marked improvement starting from Q4 2021, as increased vaccinations drive easing of restrictions, tourism inflows, and increased foot traffic. This will improve household confidence, and businesses should expect further improvement in H1 2022. 

Business Implications

Businesses should adapt their product portfolio and avoid aggressive price hikes to a more price-sensitive consumer, whose confidence will recover only gradually into mid-2022. Low domestic producer prices and a stable currency should support the margins; however, cost pressures from elevated global raw material prices and shipping challenges could trickle through to Moroccan businesses. Focusing on resilient high-income consumers will be critical, but as the growth of that segment remains stagnant, businesses can focus on upskilling partners to prepare for higher consumption in H2 2022. ​​​​​​

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