A recent World Bank report, Shifting Gears: The Private Sector as an Engine of Growth in the Middle East and North Africa, highlights the overwhelming informality of Morocco’s economy, with approximately 83% of businesses operating outside the formal legal framework.
This figure starkly contrasts with countries like Lebanon and Jordan, where informality rates stand at around 40% and 50%, respectively.
The prevalence of informal businesses in Morocco presents a significant barrier to productivity, hindering efforts to stimulate investment and create jobs. Despite this, the report notes that Morocco has seen improvements in technical efficiency, which has contributed positively to labor productivity growth.
However, the most productive firms are unable to capture a larger market share, suggesting that informality continues to limit the potential for growth.
The report also underscores Morocco’s underinvestment in both physical and human capital. In 2022–2023, only 13.8% of firms invested in physical capital, a rate significantly lower than the MENA region average of 21.7% and the 37% investment rate seen in lower-middle-income economies.
This lack of investment contributes to Morocco’s slow economic progress and poses challenges for future development.
The MENA region, including Morocco, is also grappling with one of the lowest female labor force participation rates in the world. In 2023, the female labor force participation rate in MENA was just 18%, far below the global average of 49%.
This disparity persists, with the exception of the Gulf Cooperation Council (GCC) countries, where female participation has remained relatively stable over the past two decades.
In addition to these structural challenges, the World Bank highlights several risks to the region’s expected economic recovery. These include weather shocks, such as the ongoing drought in Morocco and Tunisia, fluctuations in global oil markets, geopolitical instability, a potential slowdown in global demand, and increasing global policy uncertainty.
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