Morocco upgraded to 'BBB-/A-3' by S&P on sound economic policies

S&P Global Ratings upgraded Morocco's long- and short-term sovereign credit ratings to 'BBB-/A-3' from 'BB+/B', assigning a stable outlook. This upgrade reflects the country's supportive macroeconomic policies, solid growth prospects, and gradual budget consolidation, evidenced by 4.8% Q1 2025 GDP growth and projections for a narrowing budget deficit to 3% of GDP by 2026. The positive assessment, which anticipates net government debt falling below 60% of GDP by 2028, highlights Morocco's economic resilience and structural reform momentum despite underlying challenges such as low GDP per capita.

Analysis

S&P Global Ratings has upgraded Morocco's sovereign credit rating to investment grade at 'BBB-' with a stable outlook, a significant development driven by the country's macroeconomic policy execution and resilience. The upgrade is underpinned by strong economic performance, including a 4.8% year-over-year GDP growth in Q1 2025, and a robust forecast for average real GDP growth of 4% from 2025 to 2028. This growth is primarily fueled by domestic demand and substantial investment activity, with GDP per capita projected to rise from $4,700 to over $5,700 by 2028. Fiscal discipline is a key factor, with expectations for the budget deficit to narrow to 3% of GDP by 2026 and net government debt to decline below 60% of GDP by 2028. While the current account deficit is expected to widen slightly to over 2% of GDP, this is anticipated to be supported by strong FDI inflows, forecast to grow over 20% annually, particularly in sectors like energy and automotive, and spurred by major events such as the 2030 FIFA World Cup. The stable outlook balances this positive structural reform momentum against persistent challenges, including a relatively low GDP per capita for the rating category, high unemployment at 12.8%, and vulnerability to climate and geopolitical shocks.

Key Decisions for Investors

• The upgrade to investment grade opens Moroccan sovereign debt to a new class of institutional investors, suggesting potential for spread compression and making Moroccan government bonds an increasingly attractive asset for fixed-income portfolios.
• Given the strong GDP growth forecast and massive infrastructure investments tied to the 2025 Africa Cup of Nations and 2030 World Cup, investors should evaluate opportunities in Moroccan equities, especially within the construction, tourism, manufacturing, and banking sectors.
• Investors must actively monitor key risks outlined by S&P, including any deviation from fiscal consolidation targets, trends in the high unemployment rate, and the impact of climate-related events, as these factors could jeopardize the stable outlook and asset performance.