The Middle East Crisis: A Complex Web of Economic Implications for Morocco
The ongoing conflict in the Middle East, sparked by the US and Israeli air campaign against Iranian military targets, has far-reaching consequences for Morocco's economy. This crisis, centered around the closure of the Strait of Hormuz, is reshaping the country's economic landscape in unexpected ways.
The Energy Crisis and Rising Costs
Morocco's economy is heavily reliant on energy imports, making it particularly vulnerable to the energy crisis. The HCP projects a significant jump in Brent crude prices, reaching $89.2 per barrel in 2026, before retreating to $78.7 in 2027. This surge in energy costs directly impacts the trade bill, industrial input prices, and the state budget's subsidy line.
The report highlights the impact on butane gas subsidies, which have risen past $500 per ton, exceeding initial budget estimates. To mitigate this shock, the government allocated a MAD 20 billion ($2 billion) supplementary budget for 2026, aiming to stabilize basic goods prices and cover unexpected expenses.
The Phosphate Sector's Response
Morocco's phosphate sector, a crucial export, faces challenges due to the disruption of Gulf shipping routes. OCP, the country's largest phosphate group, is adapting by shifting production towards triple superphosphate, partially cushioning the impact. However, the sector's value added is expected to decline in 2026 before recovering in 2027, attributed to weaker demand for phosphate rock linked to the Middle East conflict.
Export Demand Slowdown
The crisis disrupts global shipping and tightens financing conditions, slowing growth among Morocco's main trading partners, particularly in the eurozone. HCP predicts a decline in external demand addressed to Morocco, from 4.9% growth in 2025 to 2.6% in 2026, before recovering to 2.9% in 2027. This deceleration is reflected in widening trade and current account deficits, highlighting the squeeze on Morocco's economy from both costlier imports and weaker export demand.
Resilient GDP Growth
Despite these challenges, Morocco's GDP growth is projected to remain resilient at 4.8% in 2026. This resilience is primarily driven by a sharp rebound in agricultural output due to favorable rainfall, adding significantly to agricultural value added. Non-agricultural GDP growth, however, is projected at a more modest 3.3%, indicating the broader economy's absorption of external shocks.
Inflationary Pressures
The report identifies 2026 as a year of rising external stress and easing agricultural stress due to favorable rainfall. Global inflation is expected to increase from 4.1% to 4.7% in 2026, largely due to energy and fertilizer price hikes, before easing in 2027. Domestically, the GDP deflator is projected to rise by 1.9% in 2026, a relatively contained figure, assuming government subsidies and agricultural rebound will absorb most imported price pressure.
Long-Term Implications
The HCP emphasizes that even a full de-escalation of tensions won't reset the economic picture. The financial residue of the crisis is likely to persist, impacting Morocco's economy long after the acute disruption. This highlights the complex and lasting nature of the economic challenges posed by the Middle East crisis.
In conclusion, the Middle East crisis is a multifaceted challenge for Morocco, impacting energy costs, the phosphate sector, export demand, and inflation. The country's economic resilience is tested, and the government's response is crucial in managing the immediate impact and mitigating long-term consequences.
