In a significant update regarding its economic outlook, the Moroccan government has revised its forecasts for the years 2026-2027 in response to external conflicts that are impacting its economic stability. This month, the High Commission for Planning (HCP) released the "Exploratory Economic Budget 2027," outlining the financial repercussions stemming from the ongoing tensions in the Middle East, particularly the closure of the Strait of Hormuz by Iran, which began on February 28. This strategic waterway's blockade, resulting from military actions involving the US and Israel against Iranian targets, has led to soaring oil and fertilizer input costs, a downturn in demand from European trading partners, and the approval of a MAD 20 billion (approximately $2 billion) emergency budget aimed at alleviating the financial burdens on Moroccan households.
The HCP's report serves as a crucial mid-year economic reference ahead of the 2027 Finance Bill, highlighting that previous optimistic projections regarding energy prices, input costs in the phosphate sector, and global trade dynamics are now overshadowed by the current geopolitical climate.
Impact on Energy Costs and Subsidies
According to the HCP, the price of Brent crude oil is expected to average around $89.2 (MAD 833.44) per barrel in 2026, marking an increase of nearly 32%, before stabilizing to about $78.7 (MAD 735.33) in 2027 as supply conditions normalize. Natural gas prices are also projected to rise by approximately 22% during this period. Given that Morocco relies heavily on imported energy, these developments directly affect the country’s trade balance, industrial production costs, and the government's subsidy obligations. The report indicates that butane gas prices have surged past $500 per ton, exceeding initial budgetary expectations and necessitating the government’s supplementary budget to stabilize essential goods prices and cover unanticipated expenditures.
In response to these rising costs, compensation spending is anticipated to reach about 1.2% of GDP this year, reflecting a significant increase driven by butane subsidies and ongoing support for transportation sectors and public utilities.
Challenges in Export Demand and Economic Growth
The report also reveals that global shipping disruptions and tighter financing conditions are likely to decelerate growth among Morocco’s key trading partners, particularly within the eurozone, which is crucial for Moroccan exports. The HCP projects that external demand addressed to Morocco will decline from a growth rate of 4.9% in 2025 to just 2.6% in 2026, with only a modest recovery to 2.9% anticipated in 2027. Consequently, the trade deficit is expected to widen from 20.5% of GDP in 2025 to 21.9% in 2026, while the current account deficit may nearly double from 2.4% to 3.9% of GDP before experiencing slight improvement the following year.
Despite these challenges, Morocco is projected to see a GDP growth of 4.8% in 2026, primarily driven by a significant rebound in agricultural output due to favorable rainfall, which is expected to add approximately 19% to agricultural value. However, non-agricultural GDP growth is estimated at a more restrained 3.3% as domestic demand, bolstered by household consumption and public investment linked to the upcoming 2030 World Cup infrastructure projects, continues to sustain the economy amid external pressures.
The report also highlights a projected increase in global inflation from 4.1% to 4.7% in 2026, largely attributed to the rising energy and fertilizer prices, with domestic inflation anticipated to rise by 1.9%. Despite the government’s efforts through subsidies and the agricultural sector’s recovery, the HCP warns that the financial ramifications of the ongoing crisis may persist beyond the immediate disruptions. The complexity of the geopolitical landscape suggests that even a resolution may not restore the economic situation to its previous state, as the long-term effects of these events are likely to linger.
As reported by moroccoworldnews.com.
