The Middle East crisis, a conflict thousands of kilometers away, has unexpectedly reshaped Morocco's economy, with far-reaching implications. This situation, triggered by Iran's closure of the Strait of Hormuz, has led to a cascade of effects, from higher energy costs to a slowdown in global trade. The High Commission for Planning (HCP) has published an exploratory economic budget for 2027, highlighting the crisis's impact on Morocco's budget, trade balance, and subsidy bill.
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 32% jump, before retreating to $78.7 in 2027 as supply conditions normalize. Natural gas prices are expected to rise by 22% over the same period. For an economy heavily reliant on energy imports, this is a critical issue. It directly affects the trade bill, industrial input costs, and the subsidy line of the state budget. Morocco's targeted subsidies on butane gas have been pushed past $500 per ton, exceeding initial budget estimates. To manage this shock, the government approved a MAD 20 billion ($2 billion) supplementary budget for 2026, aimed at stabilizing basic goods prices and covering 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 led to higher costs for these goods. OCP, Morocco's largest phosphate group, is adapting by shifting production towards triple superphosphate, a move that partially cushions the impact. However, the extractive sector's value added is projected to decline in 2026 before recovering in 2027, due 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. HCP's measure of external demand addressed to Morocco is projected to fall from 4.9% growth in 2025 to 2.6% in 2026, before recovering modestly to 2.9% in 2027. This deceleration is evident 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. Morocco is facing a squeeze from both directions: costlier imports due to the energy and input-price shock, and weaker export demand as its main customers absorb the same shock.
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 linked to a sharp rebound in agricultural output this year, following favorable rainfall, which adds roughly 19% to agricultural value added and lifts the overall growth figure. 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 critical aspect of this scenario. The report identifies 2026 as a year where the external-stress component of Morocco's economy rises sharply while the agricultural-stress component eases. This reflects favorable rainfall offsetting an unfavorable geopolitical environment. Global inflation is projected to rise from 4.1% to 4.7% in 2026, largely due to energy and fertilizer price increases, before easing slightly in 2027. Domestically, HCP expects the GDP deflator to rise by 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 has had a profound impact on Morocco's economy, affecting everything from energy costs to trade balances and agricultural output. The HCP's exploratory economic budget for 2027 provides a snapshot of these challenges and offers a projection of recovery in 2027, assuming global commodity prices decline and European demand strengthens again. However, the financial residue of the crisis is likely to outlast the acute disruption, raising deeper questions about the economy's resilience and the broader implications of global conflicts on regional economies.
