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Maghreb economies battle trading headwinds

8 July 2025

 

Investors in Morocco’s stock market are enjoying a strong bull run. In the first six months of this year, the Moroccan All Shares Index gained 24%, following a 22% rise last year. It hit a record close of 18,690 points in early June this year and, after a brief dip, was growing strongly again in early July, threatening to break through the 19,000-point barrier for the first time.

A combination of low interest rates and strong performances from local companies is helping to boost the market. There is also optimism sparked by the country’s role as a co-host of the 2030 football World Cup (alongside Spain and Portugal) and all the infrastructure spending that will flow from that.

The country’s relative economic strength is also reflected in project activity. Of the 749 projects currently planned or under way across the Maghreb region, 322 are in Morocco, according to data from MEED Projects. The leading sectors are power and water, transport and construction.

There are, though, reasons for caution. While Morocco’s stock market traders may have been doing well, all the Maghreb economies are facing some tricky international trading conditions, which could become more severe in the coming months and years.

Of the 749 projects currently planned or under way across the Maghreb region, 322 are in Morocco, according to data from MEED Projects

Global headwinds

Weak economic conditions in Europe, the region’s most important trading partner, pose a particular threat. Key markets, such as France, Germany and Italy, are experiencing anaemic growth rates, which could lead to softer demand for the Maghreb region’s exports, as well as weaker tourism and investment flows across the Mediterranean.

The imposition of tariffs by US President Donald Trump is also having a negative impact. However, the chaotic way in which the policy is being enacted means it is unclear just how much pain the duties might ultimately cause. Algeria, Libya and Tunisia look set to be worst affected, with tariff rates of 28-31% on their exports to the US, compared to 10% for Morocco.

The region’s direct trade with the US is relatively limited, but if higher tariffs dent global demand, that could have a larger impact on more export-oriented economies such as Morocco and Tunisia.

Oil market trends are likely to add to the pressure on Algeria and Libya this year, as producers continue to ramp up output. On 5 July, the eight Opec+ countries – which include Algeria, Saudi Arabia and the UAE – agreed to produce an additional 548,000 b/d from August. That will put further downward pressure on oil prices.

“A sharp drop in activity in emerging markets will be a negative for global oil demand for the rest of 2025 and into 2026,” said Edward Bell, chief economist of the Dubai-based bank Emirates NBD on 7 July. “Just the fear of policy uncertainty will be enough to limit investment.”

Other issues are also hard for the Maghreb countries to control. For example, the frequent droughts of recent years have dented agricultural activity and exports.

Among other challenges, most governments are running budget deficits and are struggling to create enough jobs for their growing populations. Unemployment in Morocco remains at around 13%, according to the IMF. It is in double figures in neighbouring countries too, according to the International Labour Organisation; Libya’s unemployment rate is probably nearer 20%.

Inward FDI into Algeria rose by 18% last year to reach $1.4bn, while in Tunisia it was up 21% to $936m and in Morocco it increased 55% to $1.6bn

Rising resilience

The Maghreb region is nevertheless showing signs of resilience, despite the various negative pressures. Inflation has been easing back in most countries in recent years and foreign direct investment (FDI) has been growing strongly.

According to the latest Unctad World Investment Report, inward FDI into Algeria rose by 18% last year to reach $1.4bn, while in Tunisia it was up 21% to $936m and in Morocco it increased 55% to $1.6bn.

A few industries are attracting some large investment deals, with Gulf money often to the fore. The UAE, for example, is helping to finance a 7,000-kilometre, $25bn gas pipeline from Nigeria to Morocco. A consortium of the UAE-based Masdar, Egypt’s Infinity and Germany’s Conjuncta is also backing a $34bn green hydrogen project in neighbouring Mauritania.

More recently, albeit on a far smaller scale, the Saudi Fund for Development signed a $38m loan agreement on 27 June this year to set up the Oasis Hub Project in southern Tunisia, which includes rural housing, infrastructure and agriculture schemes.

Some big projects have come unstuck, though. A plan by UK-based Xlinks to export power from Morocco to the UK via a 4,000km subsea cable has lost the support of the London government. On 26 June, junior energy minister Michael Shanks told the UK parliament it had decided the project was “not in the UK national interest at this time”.

There was disappointment in Morocco at the turn of events. In the short term, however, economic growth this year is expected to be a healthy 3.9% in Morocco and 3.5% in Algeria – equal to or better than last year, according to IMF data. Mauritania is expected to grow by 4.4%, which is less than in recent years, but still ahead of its neighbours.  

Tunisia is expected to lag behind, at just 1.4%, as the country’s authoritarian leadership struggles to come up with a viable economic model. A draft of the 2026-30 development plan has been promised before the end of the year by the Ministry of Economy and Planning secretary-general, Faouzi Ghrab. Libya’s outlook depends on domestic political factors that look as far from resolution as ever.

Morocco, meanwhile, is intent on solidifying its position as a regional industrial and financial hub, with its thriving stock market serving as an important lever. It is still ranked as a frontier market by index company MSCI, but is hoping for promotion to emerging market status.

The launch of derivatives trading in May is part of efforts to attract more liquidity and secure that higher ranking. Some simpler reforms might also be useful – MSCI pointed out in a June report that stock market information was not always readily available in English, which hindered its accessibility.

Yet, if the market continues to grow as rapidly as it has recently, investors are likely to find a way to address such shortcomings.

Slow year for Maghreb power and water awards

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Dominic Dudley

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    1. Dubai Court of Cassation – Cases No. 109/2022 and No. 403/2020  2. Dubai Court of Cassation – Appeals Nos. 778 and 887 of 2025  3. Abu Dhabi Court of Cassation – Cases Nos. 1115/2024 and No. 166/2024  4. Dubai Court of Cassation – Appeals Nos. 778 and 887 of 2025  5. DIFC Court of Appeal’s decision dated 9 January 2025

    About the author
    Laetitia Rabbat is deputy counsel, ICC International Court of Arbitration, Abu Dhabi

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