Morocco: Market Profile
23 August 2018
Following a slowdown in 2016, the country’s real GDP growth rate bounced back and reached 4% year-on-year in 2017. The agricultural sector has experienced a strong recovery, with a growth rate of 15.1% year-on-year. However, non-agricultural GDP remained sluggish at around 2.8% year-on-year. Over the medium term, Morocco’s economic outlook should improve provided the government remains committed to implementing deep and comprehensive reforms. The outlook remains linked to continued fiscal consolidation, a flexibly managed exchange rate regime and to the implementation of structural reforms in key areas, such as education and the labour market, in order to reduce unemployment, especially among the young, improve the business environment, and enhance human capital for higher and inclusive growth.
Sources: BMI Research
2. Major Economic/Political Events and Upcoming Elections
Morocco summoned the Algerian ambassador after a shooting incident at the border. The borders between Morocco and Algeria have been closed since 1994, and relations have remained tense because of the longstanding dispute over the territory of Western Sahara.
Morocco was disqualified from the 2015 African Cup of Nations after it refused to host the tournament over concerns about the spread of Ebola.
Authorities destroyed makeshift migrant camps near the Spanish enclave of Melilla, after hundreds storm the border fence tried to reach Europe.
Government said security services dismantle network of militants linked to Islamic State group.
Morocco expelled more than 80 UN staff in Western Sahara, reacted angrily to UN Secretary-General Ban Ki-moon's use of the word "occupation" to describe Rabat's 1975 annexation of the area.
Parliamentary elections. King picked Abdelilah Benkirane for a second term as prime minister after his party won the most seats.
King Mohammed dismissed Abdelilah Benkirane from his post as Prime Minister, due to his failure to form a coalition government. King chose former PDJ secretary-general Saad-Eddine El Othmani as his successor.
New wave of demonstrations in al-Hoceima over long-standing economic grievances.
Source: BBC country profile – Timeline
3. Major Economic Indicators
e = estimate, f = forecast
Sources: IMF, World Bank
4. External Trade
4.1 Merchandise Trade
Sources: WTO, Trade Map, BMI Research
4.2 Trade in Services
5. Trade Policies
- The Moroccan government's commitment to expanding international trade and striking further free trade agreements has seen a reduction in tariff and non-tariff barriers.
- Import tariffs - The weighted average import tariff in Morocco, at 3% in 2015, is among the lowest in the MENA region, indicating lower-cost imports for both businesses and consumers and boosting the country's appeal as an investment destination. Higher MFN tariffs are applicable to some items, particularly agricultural products and clothing, but generally businesses benefit from competitive trade tariffs.
- Customs and nontariff barriers - The customs process can be somewhat slow and burdensome, with bureaucracy remaining a barrier to trade, but generally documentary and customs compliance is more efficient than in other MENA states. Other non-tariff barriers such as inspections and onerous quality standards pose minimal obstacles.
- Restrictions on import prepayment - The government imposes a restriction on prepayment for import orders at a maximum of 30% of the total cost, in order to manage foreign currency outflows. This leaves businesses reliant on trade financing such as letters of credit, which can prove costly and pose a potential barrier to trade.
Sources: WTO – Trade Policy Review, BMI Research
6. Trade Agreement
6.1 Trade Updates
Morocco re-joined the African Union (AU) in January 2017. Its application in June 2017 to join the Economic Community of West African States (ECOWAS) has also been accepted by the latter organisation.
6.2 Multinational Trade Agreements
- Morocco-US - the FTA agreement came into force in January 2006. The US is a trading partner of Morocco's and this agreement has resulted in Morocco reducing its tariffs on imports from the US.
- Tunisia, Egypt, Jordan, Morocco - While none of these countries are within the top five exporting or importing partners of Morocco, it does serve to encourage inter-regional trade in the MENA region.
- Morocco-Turkey - the FTA agreement came into force in January 2006.
- Agadir Agreement - the Free Trade Agreement (FTA) came into force in March 2007. The signatories are, Egypt, Jordan, Morocco and Tunisia.
- EFTA - the FTA came into force in December 1999 and includes Iceland, Liechtenstein, Norway, Switzerland and Morocco.
- EU-Morocco - the FTA came into force in March 2000.
- Global System of Trade Preferences among Developing Countries (GSTP) - the partial scope agreement came into force in April 1989.
- Pan-Arab Free Trade Area (PAFTA) - the FTA came into force in January 1998.
- Association Agreement with the EU - The EU accounts for around 60% of Morocco's exports, and, therefore, trade flows are further encouraged.
Sources: WTO Regional Trade Agreements database
7. Investment Policy
7.1 Foreign Direct Investment
7.2 Foreign Direct Investment Policy
- FDI in Morocco is welcomed into a wide range of sectors, and has, traditionally, been channelled into sectors, such as textiles manufacturing, autos, real estate, finance and tourism. Recent investment announcements have included renewable energy projects (notably the world's largest concentrated solar power plant), as well as autos production plants and port expansion.
- Morocco's openness to FDI means that foreign investors come up against few regulatory or policy obstacles when entering the country's market. Most sectors have no restrictions on foreign ownership and there is no mechanism for mandatory government screening of approval of projects. The only meaningful barriers to foreign investment concern caps on foreign involvement in air and maritime transport and fisheries, and the presence of state-owned enterprises (SOEs) which limit private sector activity in some sectors, notably phosphate mining. In general, these barriers do not pose a major concern for foreign investors in Morocco, and the government's favourable attitude towards FDI means that investor sentiment is little affected by them.
- Foreign ownership restrictions - Foreign participation in companies in the air and maritime transport and maritime fishery sectors is capped at 49%. Foreign ownership of agricultural land outright is not permitted, though leases of up to 99 years are available. The government has a monopoly on the phosphate mining industry through the 95% state-owned Office Chérifien des Phosphates, restricting foreign participation to downstream industries, such as fertiliser production.
- State owned enterprises - SOEs continue to operate in some sectors of the economy, notably phosphate mining. While this precludes foreign involvement in these industries, SOEs do not significantly distort the playing field against foreign or private firms in most sectors.
Sources: WTO - Trade Policy Review, Government Sources
7.3 Free Trade Zones and Investment Incentives
|Free Trade Zone/Incentive Programme||Main Incentives Available|
|4 FTZs available across the country, including:|
Tangier, Fes, Casablanca, Marrakech, Agadir, Laayoun
|Businesses’ operations in these areas enjoy the following:|
– Exemption from customs regulations
– Exemption from foreign exchange controls
– Exemption from taxes and tariffs paid on goods entering and leaving the zone
– Corporate income tax holiday for 5 years
– Reduced corporate income tax rate of 8.75% applicable after the fifth year, for a maximum of 20 years
|Casablanca Finance City||Businesses’ operations in these areas enjoy the following:|
– Reduced corporate income tax rate of 8.75%, rising to 10% after the first five years
|Investment Charter incentives||Qualifying businesses enjoy the following:|
– Corporate income tax holiday for 5 years for exporting companies
– Reduced corporate income tax rate of 17.5% applicable after the fifth year
– Investment aid of 30% of the cost of commercial premises, and 15% of new capital goods, up to a maximum of 15% of project value or MAD30 million
Sources: US Department of Commerce, BMI Research
8. Taxation – 2018
- Value Added Tax: 20%
- Corporate Income Tax: 10%
Source: PwC Taxes at a Glance 2017
8.1 Important Updates to Taxation Information
- Starting January 1, 2018, Moroccan corporate income tax (CIT) is levied using a progressive rate scale (instead of a proportional rate scale). Credit institutions and insurance companies remain subject to a flat CIT rate of 37%.
- Starting January 1, 2018, the capital gains on non-depreciable assets recorded following a merger/demerger operation cannot be offset against available losses.
- Starting January 1, 2018, absorbing companies are allowed to carry forward the amortisation loss onto the following fiscal years.
8.2 Business Taxes
|Type of Tax||Tax Rate and Base|
|Corporate Income Tax||– 10% on income below MAD300,000|
– 20% on income between MAD300,001 - 1,000,000
– 30% on income between MAD1,000,001 - 5,000,000
– 31% on income above MAD5,000,001
– 37% on leasing companies and credit institutions
|Branch tax||15% on after tax profits of branch offices|
|Withholding Tax||– 15% on dividends paid to non-residents|
– 10-30% on interest
– 10% on royalties
|Professional Tax||10%-30% on the rental value of business premises|
|Social Security Contributions||– 6.4% family allocation on gross salaries|
– 8.6% social allocation on salaries up to MAD6,000
– 1.6% professional tax on gross salaries
– 4.11% mandatory medical care on gross salaries
|VAT||20% standard rate on sale of goods and services|
9. Foreign Worker Requirements
9.1 Foreign Worker Permits
Companies wishing to employ foreign workers in Morocco for more skilled positions must apply for work permits (attestation de travail) from the National Agency for the Promotion and Employment of Skills (Agence Nationale de Promotion de l'Emploi et des Compétences).
Required documents to obtain a permit are relatively standard: employment contract, copies of degrees, copies of passport and application form. The process is free, but can take several weeks and the Moroccan bureaucracy can be complicated to navigate for foreigners.
9.2 Visa/Travel Restrictions
Citizens from 68 countries (including many European and MENA countries, but not Algeria) do not need visas for stays up to 90 days. Foreigners from countries that require a visa to enter Morocco as visitors must apply in person at the Moroccan consular post where they currently reside. Business visas for 90-day stays cost USD27.00 for one entry and USD40.50 for two entries.
9.3 Religious/Cultural Barriers
Cultural restrictions severely limit the participation of women in the labour force. Expatriates should also be cautious with restrictions to free speech, especially when it comes to the royal family.
Sources: Government websites, BMI Research
10.1 Sovereign Credit Ratings
|Rating (Outlook)||Rating Date|
|Standard & Poor's||BBB- (Stable)||15/11/2013|
Sources: Moody's, Standard & Poor's, Fitch Ratings
10.2 Competitiveness and Efficiency Indicators
|Ease of Doing Business Index ||68/189||68/190||69/190|
|Ease of Paying Taxes Index||62/189||41/190||25/190|
|Logistics Performance Index ||86/160||N/A||N/A|
|Corruption Perception Index||90/176||81/180||N/A|
|IMD World Competitiveness||N/A||N/A||N/A|
Sources: World Bank, IMD, Transparency International
10.3 BMI Risk Indices
|Economic Risk Index Rank||93/202|
|Short-Term Economic Risk Score||50.4||51.3||49.2|
|Long-Term Economic Risk Score||52.2||53.1||53.0|
|Political Risk Index Rank||70/202|
|Short-Term Political Risk Score||64.2||67.9||67.9|
|Long-Term Political Risk Score||68.5||69.9||69.9|
|Operational Risk Index Rank||79/201|
|Operational Risk Score||50.8||52.5||53.6|
Source: BMI Research
10.4 BMI Risk Summary
High trade exposure to the Eurozone markets poses a medium-term risk to Morocco's growth. Approximately two-thirds of the country's goods exports are absorbed by its northern neighbours. As a consequence, the export sector is highly vulnerable to any economic downturn in the Eurozone, particularly in light of global trade tensions and risks stemming from the UK's planned separation from the EU. The tourism industry also relies extensively on visitors from France, Spain, the Benelux countries and the UK, and any downturn in the security situation would harm growth. Over the longer term, the economy will benefit from a greater exposure to emerging markets in the Middle East and North Africa and in Sub-Saharan Africa.
Morocco offers a number of strategic advantages across its operational risk profile which makes it a more attractive location for investment than many of its regional peers. In particular, relatively high levels of security, an integrated supply chain network, openness to foreign investment and well developed financial markets contribute to an environment conducive to businesses. However, key risks are present in the country's labour market, including low levels of educational attainment, which dampen the competitiveness of the workforce. As a result, businesses may face elevated labour costs and limited availability of skilled workers. Morocco also has one of the highest income and personal tax rates in the Middle East and North Africa region, representing a notable drawback to the country's appeal for businesses.
100 = Lowest risk, 0 = Highest risk
Source: BMI Research Economic and Political Risk Indices
10.5 BMI Operational Risk Index
|Operational Risk||Labour Market Risk||Trade and Investment Risk||Logistics Risk||Crime and Security Risk|
|MENA Position (out of 18)||8||17||4||7||8|
|MENA Position (out of 18)||8||17||4||7||8|
|Global Position (out of 201)||79||160||52||69||79|
100 = Lowest risk, 0 = Highest risk
Source: BMI Operational Risk Index
|Country||Operational Risk Index||Labour Market Risk Index||Trade and Investment Risk Index||Logistics Risk Index||Crime and Secruity Risk Index|
|West Bank And Gaza||33.7||46.4||36.8||30.2||21.5|
|Emerging Markets Averages||46.8||48.0||47.5||45.8||46.1|
|Global Markets Averages||49.8||49.8||50.0||49.3||49.9|
Higher score = Lower risk
Source: BMI Operational Risk Index
11. Hong Kong Connection
11.1 Hong Kong’s Trade with Morocco
|2017||Growth rate (%)|
|Number of Moroccan residents visiting Hong Kong||6,378||-0.8|
|Number of Moroccan residing in Hong Kong||N/A||N/A|
Sources: Hong Kong Tourism Board
|2017||Growth rate (%)|
|Number of African residents visiting Hong Kong||142,512||-11.6|
Sources: Hong Kong Tourism Board, BMI Research
11.2 Commercial Presence in Hong Kong
|2016||Growth rate (%)|
|Number of Moroccan companies in Hong Kong||N/A||N/A|
|- Regional headquarters|
|- Regional offices|
|- Local offices|
Source: Hong Kong Census & Statistics Department
11.3 Treaties and Agreements between Hong Kong and Morocco
Morocoo and China have a Bilateral Investment Treaty which came into force in March 1995.
11.4 Chamber of Commerce (or Related Organisations) in Hong Kong
Morrocan Consulate in Hong Kong
Address: 60 Peak Road, The Peak, Hong Kong
Visa section: Room 3401, New World Tower, 18 Queen's Road Central, Central, Hong Kong
Hours of Business: 10:30 a.m. - 12:30 p.m. and 2:30 p.m. - 4:30 p.m.
Honorary Consul: Mr William Doo Wai-hoi
Tel: (852) 2138 3388
Fax: (852) 2868 1988
11.5 Visa Requirements for Hong Kong Residents
Hong Kong residents are granted 30 days visa-free access.
Source: Visa on Demand