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In our view, Morocco presents a unique frontier market story, blending the dynamism of an emerging economy with the stability and reform-minded governance more typical of developed markets. In the following Q&A, we explore why we believe Morocco stands out—from its pro-business reforms and modern infrastructure to its expanding role as a gateway between Europe, Africa, and the Middle East. We believe Morocco can offer compelling opportunities for long-term investors looking to tap into a market on the rise.

Morocco’s economy is notably diversified, with the services sector contributing to more than half of GDP—54%—a foundation supported by real estate, trade, and a thriving tourism sector, which alone contributes more than 10%.1 Meanwhile, the industrials sector represents about 25% of GDP, bolstered by a growing manufacturing base in areas such as automotive, aerospace, and chemicals. At the same time, Morocco is tempering its dependency on agriculture. Looking ahead, we expect structural reforms and increased industrial output to sustain overall growth rates of approximately 3.5%–4.5% (Exhibit 1).

EXHIBIT 1

Potential for Further Growth

As of April 2025
Source: International Monetary Fund Country Report

Compared to many frontier markets, we believe Morocco’s macroeconomic stability is commendable, characterized by moderate debt levels, controlled inflation, consistent growth, and declining fiscal deficits that have earned it one of Africa’s highest credit ratings. Major credit rating agencies have affirmed Morocco’s ratings at Ba1/BB+, just shy of investment grade, with a stable or positive outlook, and credible fiscal consolidation efforts. 

Foreign direct investments (FDI) have been a cornerstone of Morocco’s development, funding—and catalyzing—industrial hubs and infrastructure that now propel corporate growth. FDI inflows have hovered near $2 billion in 2024, equivalent to roughly 2% of GDP (Exhibit 2).

EXHIBIT 2

Foreign Investments Offer Solid Base

As of April 2025
Source: International Monetary Fund Country Report

The government’s Investment Charter (2022) has helped set the stage, offering incentives (tax breaks, subsidies, etc.) to attract higher value-added projects, aiming to raise FDI to more than 4% of GDP. Led by France and Spain, key sources of FDI have come from Europe, followed by the Gulf Arab states, the United States, and, increasingly, China. European investors dominate in manufacturing and finance, while Gulf capital has targeted real estate, tourism, and renewables.

To continue its courtship of private markets, Morocco is executing several “megaprojects” focused on improving national logistics, which may directly benefit listed companies’ earnings. These projects include infrastructure development (key strategic ports like Tanger Med and Dakhla Atlantic and high-speed rail), a high-tech industrial city (Mohammed VI Tangier Tech City, underscoring a move up the value chain), and ambitious renewable energy buildouts (green hydrogen and windfarms).

Targeted industrial policies have positioned Morocco as a hub for automotive and aerospace exports, while driving growth in financial services, healthcare, the energy transition, and agro-industry modernization. Massive infrastructure investments underpin these sectors, further boosting productivity and corporate earnings.

For example, Morocco has emerged as Africa’s leading automotive hub, producing more than 500,000 vehicles in 2024, and is poised to surpass South Africa in production output by 2025. Global automakers Renault and Stellantis (Peugeot Citroën) operate major manufacturing facilities in Tangier and Kenitra, respectively. The government’s Industrial Acceleration Plan (2014–2020) offered tax incentives and infrastructure to auto suppliers, yielding a dense cluster of more than 250 automotive suppliers. As a result, automotive exports reached $14 billion in 2023. The sector employs 260,000 people and has driven a surge in small- and medium-sized suppliers.

Morocco’s strategy now targets electric vehicle (EV) and battery manufacturing. China’s BYD and other EV players are in talks for local assembly while investing in battery component plants. The industry aims to raise car production capacity from 700,000 currently to 1.4 million by 2028, according to the Moroccan Industry Ministry. This implies continued double-digit growth in automotive GDP contribution and export earnings

In aerospace, Morocco has pulled off a quieter revolution. From negligible output two decades ago, the country now hosts more than 140 aerospace and defense companies, employing 20,000 workers and generating aerospace exports of $1.6 billion annually. Partnerships with Boeing, Airbus, and Bombardier, plus Morocco’s new aerospace institute, have built a competitive aerospace cluster in Casablanca’s Midparc free zone. 

Morocco has leveraged its proximity to Europe and cultural links to Africa to become a business bridge between the two continents. European firms, for example, use Morocco as a nearshore manufacturing and logistics hub for African markets. Morocco’s modern infrastructure (ports, airports, highways) and relatively high rankings in logistics performance reflect this bridging role. 

Morocco is deeply integrated into global trade networks, benefiting from preferential trade agreements with 62 countries. Since the EU-Morocco Association Agreement in 2000, it has been an associate member of the European Union’s single market for industrial goods, allowing Moroccan industrial exports to Europe to be tariff-free. Additionally, while now subject to a 10% tariff, Morocco is also the only African country with a Free Trade Agreement with the United States, established in 2006.

Morocco’s diplomatic skill is further evidenced by its success in securing the co-hosting rights for the 2030 World Cup alongside Spain and Portugal—a reflection of its strong international standing.

Despite its strengths, Morocco does face some challenges, such as water scarcity and youth unemployment.

Water scarcity stands out as one of Morocco's most critical hurdles. Recurrent droughts have a direct impact on agricultural output, causing GDP to fluctuate by one to two percentage points annually and threatening rural livelihoods. Climate models predict that Morocco will face more frequent droughts and heightened water stress in the future.2 This issue also strains the national budget through emergency drought relief spending and may accelerate rural-to-urban migration, leading to potential social consequences. To address this, the government has made significant investments in desalination and irrigation projects, which are expected to be fully operational by the mid-to-late 2020s.

Morocco has a young population, with a median age of approximately 30, and hundreds of thousands of people entering the labor market each year. Youth unemployment is notably high at around 37%, posing a significant challenge. Overall, unemployment stands at 13%–14%, but the jobless rate among graduates is elevated at approximately 20%.3 Without sufficient growth to create skilled jobs, the risk of social discontent could increase. To address this, the government has implemented vocational training programs aligned with industry needs, such as automotive and offshoring sectors, and is also expanding public-sector hiring in areas like education and law enforcement.

We remain optimistic that Morocco offers a compelling frontier market opportunity underpinned by economic stability, pro-business reforms, and accelerating industrialization. In our view, the country is a frontier market graduate in the making, combining strong fundamentals with attractive structural growth drivers and an investment case that rests on several strategic themes:

  • Demographics: With a young and growing population of approximately 38 million people, and a rising urban middle class, the country offers expanding domestic markets in various sectors such as housing, healthcare, retail, banking, and telecommunications. We expect this demographic trend to drive significant demand and economic activity within the nation.
  • Industrialization: The country’s success in industries such as automotives, aerospace, and fertilizers has led to an increase in high-value exports as a share of GDP.
  • Integration into the global economy: We believe Morocco’s integration into European supply chains, facilitated by competitive labor costs and geographic proximity, positions it to benefit from trends like European companies seeking nearshoring alternatives to Asia. Furthermore, located at the crossroads of Europe and Africa, Morocco occupies a strategic sweet spot, which may enhance diplomacy and investment appeal.
  • Infrastructure: Morocco’s expanding infrastructure—from high-speed trains, world-class ports, to digital infrastructure—has enhanced connectivity and productivity across the country. By 2030, Morocco’s modern transport links are expected to connect all major cities and industrial hubs, which would likely drive efficiency, open new tourism destinations, and support housing development, with broad multiplier effects on the economy.

Notes

1. International Monetary Fund Country Report; April 2025

2. The World Bank; Washington, DC,  2020: Water Scarcity in Morocco: Analysis of Key Water Challenges
3. International Monetary Fund Country Report; April 2025

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Published on 13 November 2025.

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