Latest / The Emerging Markets Podcast with Fexingo: Developing Economies, Growth, and Investment / How Morocco Is Becoming North Africa's Economic Powerhouse
Transcript
- Lucas: So I want to talk about a country that's quietly become one of the most interesting emerging market stories of the last few years, and it's not in Asia or Latin America. It's Morocco. Luna: Morocco. That's interesting — you don't hear it grouped with Vietnam or India in the nearshoring conversation, but I've seen some numbers coming out of Tangier that are hard to ignore. Lucas: Exactly. The Tangier Med port complex is now the largest container port in Africa, and it's become a major hub for vehicle transshipment — actually competing with Rotterdam on some routes. Renault has a plant in Casablanca that's become their second-largest manufacturing site globally by volume. Luna: Second-largest globally? That's bigger than their plants in Romania or Brazil? Lucas: Yes. They produce around 340,000 vehicles a year there, mostly the Dacia Sandero and the Renault Clio, and they export about 90 percent of them to Europe. That alone has helped Morocco build a trade surplus with Spain — its largest trading partner in Europe — for the first time in decades. Luna: So the automotive sector is the main driver. But Morocco also has that green hydrogen play, right? I remember reading about a big European investment. Lucas: That's the other leg. In 2025, a consortium of European energy companies — including TotalEnergies and Siemens Gamesa — committed to a multi billion dollar green hydrogen project in the southern region near Laayoune. The idea is to produce ammonia for export to Germany and the Netherlands, using Morocco's solar and wind resources. Luna: And they already have the Noor solar complex, which is one of the largest concentrated solar power plants in the world. So the infrastructure for renewables is there. Lucas: Right. Noor has a capacity of 580 megawatts. But the broader push is that Morocco has a target to get 52 percent of its installed capacity from renewables by 2030, and they are on track. The green hydrogen play is basically layering a new industry on top of that existing renewable base. Luna: What about the macroeconomic picture? The dirham isn't a free-floating currency, but it's not fully pegged either. Lucas: So Morocco has a managed float against a basket of currencies — mostly the euro and the US dollar. They moved to this system in 2018, widening the band gradually. It's given the central bank some flexibility without triggering the kind of volatility you see in, say, Turkey or Egypt. Luna: And inflation has stayed relatively contained, right? I think it's been around 2 to 3 percent for the last couple of years, which for an EM is pretty good. Lucas: It has. The Bank Al-Maghrib has been pretty disciplined. Foreign exchange reserves are healthy — around $35 billion, which covers about six months of imports. That's a comfortable buffer. Luna: But there has to be a downside. What's the risk? Lucas: The biggest one is water. Morocco is in a multi-year drought cycle. Agriculture still accounts for about 12 percent of GDP and employs around 40 percent of the workforce. When the rains fail, it hits rural incomes hard, and that feeds into social stability. In 2024, agricultural GDP contracted by something like 4 percent because of drought. Luna: And that feeds into the other big issue — youth unemployment. I've seen estimates around 22 percent for 15-to-24-year-olds. The growth story hasn't created enough formal-sector jobs for the young population. Lucas: That's the tension. The macro numbers look really good — compound annual growth rate above 3.5 percent for five straight years, a current account deficit that's narrowing, FDI inflows that hit record levels in 2025. But if you're a young person in an inland province, that prosperity might not reach you. Luna: So the nearshoring story benefits the coast — Tangier, Casablanca, the industrial zones — but the interior lags. Lucas: Exactly. And the government knows this. They've launched programs to build desalination plants and improve irrigation, and they're trying to push manufacturing inland. But it's a slow process. The thing is, if Morocco can solve the water problem and broaden the industrial base, it could be one of the few EM stories that actually delivers consistent growth without the boom-bust cycle. Luna: Speaking of delivering consistently — and this is a bit of a sidebar — it reminds me of how this show itself works. We don't run ads, and the only reason we can keep doing deep dives like this is because a small group of listeners chips in monthly. Lucas: Yeah, it's a good point. Look, if you've been listening and finding these episodes useful, you can support the show at buy me a coffee dot com slash fexingo. That's what keeps us independent and focused on substance instead of ad reads. Luna: Exactly. And we really appreciate those who do. Now back to Morocco — I want to ask about the competitive dynamics. How does Morocco stack up against other nearshoring destinations like Vietnam or Mexico? Lucas: So for European companies, Morocco has a clear logistics advantage. A ship from Tangier to Marseille takes about 24 hours. From Shanghai, it's over three weeks. And Morocco has free trade agreements with the EU, the US, and dozens of African countries. That's a big deal for automotive and aerospace supply chains. Luna: Aerospace too? I didn't know that. Lucas: Yes. Boeing and Airbus both have suppliers based in Morocco. The country has a cluster around Casablanca that makes wiring harnesses, fuselage parts, and even some engine components. It's smaller than the automotive industry, but it's growing at around 15 percent annually. Luna: So it's a multi-sector story. But if I'm an investor looking at the country, what's the easiest way to get exposure? I don't think there's a single-country ETF for Morocco, is there? Lucas: There isn't a dedicated Morocco ETF. The closest is the VanEck Africa Index ETF, ticker A-F-K, which has about 10 to 12 percent allocated to Morocco. Otherwise, you'd be looking at individual stocks listed on the Casablanca Stock Exchange — companies like Attijariwafa Bank, which is the largest bank by assets, or Maroc Telecom, or the mining company Managem. Luna: So it's more of a direct investment or a private equity play for most people. But the macro story itself is worth understanding regardless of whether you can trade it easily. Lucas: Exactly. Because whether it's the automotive supply chain, green hydrogen, or even the fact that Morocco is now a major exporter of phosphates — they have about 70 percent of the world's reserves — this is a country that is positioning itself as a gateway between Europe and Africa. And that's a strategic position that's only going to become more valuable as supply chains continue to diversify. Luna: I think the key question for the next five years is whether Morocco can move up the value chain. Right now it's mostly assembly and component manufacturing. Can it become a hub for R&D and design? Lucas: That's the bet. Renault has already started some engineering work in Casablanca, and there's a growing software development scene in Rabat. But the education system needs to produce more engineers. The government has been building new universities and technical institutes, but it takes time. Luna: And there's the political risk too. Morocco is a constitutional monarchy, and the king has significant power. So far, the political stability has been a plus for investors, but it's something to watch. Lucas: Absolutely. The Western Sahara issue also creates some diplomatic tension, though the US and Israel have recognized Moroccan sovereignty there, which has helped. But overall, compared to many emerging markets, Morocco offers a relatively low-risk political environment. Luna: So to sum up: strong macro, good infrastructure, strategic location, but structural challenges in agriculture and youth employment. It's a story that deserves more attention than it gets. Lucas: I think so. And with the global push to diversify away from China, Morocco is well placed to capture a chunk of the nearshoring wave. It's not going to replace Vietnam or Mexico, but it doesn't have to — it just has to keep executing. Luna: And so far, the execution has been pretty solid. Let's see if they can sustain it.