Morocco: Selected Issues

This Selected Issues paper examines Morocco’s infrastructure strategy through the lens of growth payoffs and fiscal risks. This study assesses the role of infrastructure in Morocco’s productivity growth and evaluates the macroeconomic impact of its planned investment scale-up. It first quantifies historical contributions using cross-country panel regressions, identifying sectors with the highest returns. It then applies the IMF’s Flexible System of Global Models, a multiregion general equilibrium framework calibrated for Morocco, to analyze short-term demand effects, long-term productivity gains, and fiscal-private sector interactions. Results indicate that infrastructure improvements since the mid-2000s have significantly boosted productivity, with both quantity and quality playing key roles. Planned investments for 2024–2030 could sustainably raise long-term productivity, provided implementation is efficient and fiscally disciplined. Simulations suggest real gross domestic product could be about 3 percent higher in the long run, with debt rising temporarily during construction before declining. Enhancing efficiency, controlling costs, and strengthening investment management are critical to ensuring fiscal sustainability and maximizing growth benefits.