The Middle East Crisis: A Ripple Effect on Morocco's Economy
The ongoing conflict in the Middle East, sparked by the US and Israeli air campaign against Iranian military targets, has far-reaching consequences, and Morocco is feeling the impact. The High Commission for Planning (HCP) has released an insightful report, shedding light on how this crisis is reshaping the North African country's economy.
One of the most immediate effects is the surge in energy costs. With the Strait of Hormuz closed, oil and natural gas prices are skyrocketing. HCP predicts Brent crude to average $89.2 per barrel in 2026, a 32% increase, before dropping to $78.7 in 2027 as supply conditions improve. This is a significant concern for Morocco, heavily reliant on imported energy. The report highlights the impact on butane gas subsidies, which have risen past $500 per ton, forcing the government to allocate a MAD 20 billion ($2 billion) emergency budget to stabilize prices and protect households.
The phosphate sector, a cornerstone of Morocco's economy, is also feeling the pinch. The country's chemical and mining industries rely on imported inputs like sulfur, urea, and ammonia, primarily transported through Gulf shipping routes. The Hormuz closure has led to higher costs for these goods, prompting OCP, Morocco's largest phosphate exporter, to shift production towards triple superphosphate. While this substitution provides some relief, the overall extractive sector's value added is expected to decline in 2026 before recovering in 2027, attributed to weaker demand for phosphate rock due to the Middle East conflict.
The crisis is also affecting Morocco's trade relationships. The disruption to global shipping and financing conditions is slowing growth among European trading partners, particularly in the eurozone, which is Morocco's primary export destination. HCP predicts a decline in external demand, with growth falling from 4.9% in 2025 to 2.6% in 2026, before recovering to 2.9% in 2027. This translates to a widening trade deficit and a nearly doubling of the current account deficit, squeezing Morocco's economy from both import and export sides.
Despite these challenges, Morocco's GDP is projected to grow by 4.8% in 2026, thanks to a remarkable agricultural rebound. Favorable rainfall has boosted agricultural output, contributing significantly to GDP growth. However, non-agricultural GDP growth is more modest at 3.3%, highlighting the uneven impact of the crisis. Domestic demand, driven by household consumption and World Cup-related infrastructure, continues to support the economy, even as other sectors struggle.
Inflation is another area of concern. While global inflation is expected to rise from 4.1% to 4.7% in 2026, largely due to energy and fertilizer price increases, Morocco's domestic inflation is projected to remain relatively contained at 1.9%. This is attributed to the government's subsidy response and the agricultural sector's resilience. However, the HCP warns that the financial residue of the crisis will persist, even if tensions between the US and Iran de-escalate.
In conclusion, the Middle East crisis is significantly impacting Morocco's economy, affecting energy costs, the phosphate sector, trade, and inflation. The country's ability to navigate these challenges will depend on its ability to manage subsidies, adapt to changing trade dynamics, and maintain domestic demand. As the crisis continues, Morocco's economic resilience will be tested, and the HCP's report provides a valuable insight into this complex situation.
