Foreign direct investment (FDI) in Morocco witnessed a significant drop in 2023, reaching their lowest level in nearly two decades, according to the 2024 World Investment Report.
This decline reflects a broader trend in developing economies, where FDI inflows dipped by 7% compared to 2022.
Mohamed Jedri, an economist, told Hespress EN that the COVID-19 pandemic caused a global decline in foreign investments due to several factors.
Firstly, the geopolitical landscape became uncertain. Conflicts like the war in Ukraine and tensions in the Gaza Strip and Red Sea region led investors to adopt a cautious approach.
Secondly, access to bank funding became more expensive. Inflationary pressures forced central banks to raise interest rates, making loans less attractive. An investment previously requiring a $1 million loan with a 4% interest rate might now cost 6% or 7%.
Thirdly, the pandemic weakened consumer demand. Domestic and foreign businesses faced difficulties finding customers due to declining purchasing power in Morocco and other countries.
However, according to the expert, Morocco is showing signs of recovery. During the first five months of 2024, foreign investments started returning to normal levels, which can be attributed to several positive developments.
Inflation has dropped significantly, from 6% in 2022 to a current rate of around 1-2%. Additionally, central banks are starting to ease their tight monetary policies.
Finally, with the initial shock of the conflicts subsiding, investors are regaining confidence in the future and seeing the potential for their investments in Morocco.
According to the report, the picture for Africa is more nuanced, with some sectors experiencing growth despite the overall decline.
While Morocco grapples with a decrease in foreign investment, the continent of Africa presents a mixed bag of results.
The total FDI inflow to Africa fell by a smaller margin of 3% compared to the global average. This suggests that Africa might become a more attractive investment destination in certain sectors.
One positive indicator for Africa is the rise in greenfield projects, representing new ventures established by foreign investors.
The number of such projects globally increased by 7% in 2023. Morocco, in particular, benefited from this trend, attracting significant foreign investment in the electric vehicle (EV) sector.
A Chinese manufacturer announced plans to establish a massive $6.4 billion EV battery plant in Morocco, showcasing confidence in the country’s potential as a hub for the burgeoning EV industry.
However, a closer look reveals a more complex picture of Africa. While greenfield projects are on the rise, their overall value declined in 2023.
This decrease can be largely attributed to a significant drop in investment in electricity and gas supply projects. This shift in focus suggests that investors might prioritize newer sectors like electric vehicles over traditional energy sources.
Despite the drop in FDI, Morocco’s attraction to a major EV battery plant presents a positive sign. This investment could pave the way for developing a robust EV ecosystem within the country, potentially attracting further investments in related industries.
The focus on electric vehicles aligns with global trends toward sustainable transportation, positioning Morocco as a player in a rapidly growing market.
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