In the wake of the Middle East crisis, Morocco's economy is facing a series of challenges that are reshaping its economic landscape. The closure of the Strait of Hormuz, a pivotal shipping route, has had a profound impact on the country's budget, trade balance, and subsidy bill. This crisis, triggered by the US and Israeli air campaign against Iranian military targets, has led to a significant increase in energy and fertilizer costs, as well as a slowdown in demand from Morocco's European trading partners. The High Commission for Planning (HCP) has published an exploratory economic budget for 2027, highlighting the direct effects of these disruptions on the country's economy.
One of the most immediate consequences is the surge in energy costs. The HCP projects Brent crude to average $89.2 per barrel in 2026, a nearly 32% jump, before retreating to $78.7 in 2027 as supply conditions normalize. Natural gas prices are expected to rise by around 22% over the same period. For an economy heavily reliant on energy imports, this is not just a commodity story; it directly impacts the trade bill, industrial input costs, and the subsidy line of the state budget. Morocco's targeted subsidies on butane gas have been pushed over budget, necessitating a MAD 20 billion ($2 billion) supplementary budget for 2026 to stabilize basic goods prices and cover unbudgeted spending.
The phosphate sector, a cornerstone of Morocco's economy, is also feeling the pinch. The country's chemical and mining industries depend on imported sulfur, urea, and ammonia, much of which historically traveled through Gulf shipping routes. The Hormuz-related disruptions have pushed up the costs of these goods. OCP, one of Morocco's most important exporters and the country's biggest phosphate group, is adapting by shifting its production towards triple superphosphate, a move that partially cushions the blow. However, the extractive sector's value added is projected to decline in 2026 before recovering in 2027, attributed to weaker demand for phosphate rock tied to the broader Middle East conflict.
The disruption to global shipping and the tightening of financing conditions are expected to slow growth among Morocco's main trading partners, particularly in the eurozone, which remains the primary destination for Moroccan exports. HCP's measure of external demand addressed to Morocco is projected to fall from 4.9% growth in 2025 to just 2.6% in 2026, before recovering modestly to 2.9% in 2027. This deceleration is reflected in the trade accounts, with the trade deficit widening from 20.5% of GDP in 2025 to 21.9% in 2026, and the current account deficit nearly doubling from 2.4% to 3.9% of GDP before easing slightly in 2027.
Despite these challenges, Morocco's national GDP is still projected to expand by 4.8% in 2026, a figure that appears resilient. This resilience is directly linked to a sharp rebound in agricultural output this year following favorable rainfall, adding roughly 19% to agricultural value added and lifting the overall growth figure almost independently of developments in oil and trade. Non-agricultural GDP growth, however, is projected at a more modest 3.3% in 2026, reflecting the broader economy's absorption of the external shock.
Domestic demand, supported by household consumption and public investment tied to the 2030 World Cup infrastructure, is keeping the non-agriculture economy moving even as other sectors deteriorate. Inflation is another area of concern, with global inflation projected to rise from 4.1% to 4.7% in 2026, largely due to the same increases in energy and fertilizer prices, before easing slightly in 2027. Domestically, HCP expects the GDP deflator to rise 1.9% in 2026, a relatively contained figure that assumes the government's subsidy response and the agricultural rebound will absorb most of the imported price pressure.
In conclusion, the Middle East crisis is reshaping Morocco's economy in profound ways. The country is facing a squeeze from both costlier imports and weaker export demand, while also navigating the financial residue of the crisis. Despite these challenges, Morocco's economy is projected to grow, albeit at a more modest pace, with resilience stemming from agricultural rebound and domestic demand. However, the broader implications of the crisis, including the impact on global shipping and financing conditions, are likely to outlast the acute disruption, raising deeper questions about the country's economic resilience and the broader geopolitical landscape.
