Morocco scores 61.8 on economic freedom, but labor rigidity and informality hold it back

The score that tells two stories

Morocco scored 61.8 out of 100 in the Heritage Foundation's 2026 Index of Economic Freedom, ranking 83rd out of 184 economies. That is 1.5 points higher than last year. It keeps Morocco in the "moderately free" category, the only North African country to hold that status.

The improvement is real. Heritage named Morocco among its global top improvers for 2026, alongside Oman, the Philippines, and Paraguay. The country's regulatory reforms are working. Business entry is easier. Monetary policy is stable. The productive base is more diversified than it was five years ago.

But 83rd is still 83rd. Morocco sits below Vietnam (59th), Malaysia (48th), and Saudi Arabia (57th), all countries competing for the same foreign investment. And the index exposes a structural problem that no amount of business registration reform will fix: nearly 70% of Morocco's workforce operates in the informal economy, youth unemployment hovers around 37%, and women face a participation gap of 15 to 19 percentage points.

Morocco is getting easier to start a business in. The question is whether it is getting easier to build a career in.

What improved and what did not

The Heritage Foundation measures economic freedom across four categories: rule of law, government size, regulatory efficiency, and market openness. Each breaks down into three subcategories, for 12 components total. Each scored 0 to 100.

Morocco's strongest scores are in monetary freedom (74.7) and business freedom (68.9). These reflect Bank Al-Maghrib's disciplined inflation targeting, which held the key rate at 2.25% in March 2026, and the government's push to simplify company registration.

The weakest score is labor freedom at 48.5, well below the global average. This captures rigid hiring and firing rules, high minimum wage relative to productivity in some sectors, and the mismatch between what workers know and what employers need. Morocco's labor code, last overhauled in 2004, has been the subject of reform discussions for years. Progress has been slow.

The government knows this. The New Investment Charter (Framework Law 03.22), signed in late 2022, explicitly targets a shift from public-led to private-led investment. The goal: raise private investment from one-third of total investment to two-thirds by 2035. The charter offers grants of up to 30% of project value, with bonuses for job creation, women's employment, and investments in green energy or digital technology.

Three years into the charter, early results are mixed. Business registrations have increased. Foreign direct investment flows remain volatile, influenced more by global conditions (the ongoing Middle East conflict, European economic slowdown) than by domestic regulatory tweaks.

How Morocco compares to its peers

The value of the Economic Freedom Index is less in absolute scores than in relative positioning. Where does Morocco stand against the countries it competes with for capital, talent, and trade agreements?

Against North Africa, Morocco leads by a wide margin.

Tunisia's score has collapsed since 2021, when the country entered a prolonged political and economic crisis. Egypt's heavy state involvement in the economy and currency controls keep its score low. Algeria's hydrocarbon dependence and restrictive business environment leave it near the bottom globally.

Morocco is not competing with these countries for the same investment. It is competing with this tier:

Against emerging market competitors:

Morocco outperforms Turkey and South Africa, both larger economies with deeper structural problems. It trails Vietnam by 3.4 points and Malaysia by 5.3. The gap with the UAE (9.8 points) and Saudi Arabia (2.6 points) reflects those countries' advantages in investment openness and lighter regulatory burdens, funded in part by hydrocarbon wealth.

The most relevant comparison may be Vietnam. Both countries are manufacturing-oriented, export-focused economies that have attracted significant FDI in automotive, electronics, and textiles. Vietnam's edge comes from trade freedom (it has more free trade agreements in force) and a larger, younger workforce with lower labor costs. Morocco's edge is geographic proximity to Europe, the EU free trade agreement, and a more stable currency.

Against itself over time:

Morocco's score has moved from roughly 58 in 2020 to 61.8 in 2026. That is a 3.8-point gain in six years, an average of 0.63 points per year. At this pace, Morocco would cross the 65-point threshold (the bottom of "moderately free" trending toward "mostly free") around 2031. That timeline matters: the 2030 World Cup and the broader 2030 infrastructure targets are designed to present a different Morocco to the world.

What this means for investors and policymakers

For foreign investors evaluating Morocco, the Economic Freedom Index confirms what on-the-ground experience already suggests: the entry points are good, the operating environment is harder.

Starting a business in Morocco is straightforward. Maintaining and scaling one requires navigating a labor market that penalizes formal employment. When the informal economy absorbs 70% of workers, formal employers bear disproportionate tax and social security burdens. This creates a vicious cycle: high formality costs push more activity informal, which narrows the tax base, which increases the burden on those who remain formal.

Three reforms would move the needle most:

1. Labor code modernization. The 2004 code needs updating to reflect a service-oriented economy. More flexible contract types, clearer severance rules, and lower barriers to formal part-time work would help.

2. Informal economy integration. The auto-entrepreneur regime, launched in 2015, has registered over 500,000 workers. But most remain at subsistence level. Linking registration to meaningful benefits (health coverage, retirement, access to credit) would accelerate formalization.

3. Skills alignment. Youth unemployment at 37% alongside employer complaints of skills shortages points to a training system that does not match market needs. The government's PACTE ESRI reform of higher education, launched in 2023, targets this gap. Results will take years.

Morocco's 2026 score tells the story of a country that has mastered the inputs (regulatory reform, monetary stability, trade openness) but has not yet resolved the structural constraints (labor rigidity, informality, skills gaps) that determine whether reform translates into broad-based economic opportunity.

The Heritage Foundation's index is one data point. It does not capture Morocco's infrastructure investments, its renewable energy ambitions, or its strategic positioning between Europe and Africa. But it does capture something investors care about deeply: how easy it is to do business, hire people, and move capital. On those measures, Morocco is improving, but it is not yet where it needs to be.

Methodology note

The Heritage Foundation's Index of Economic Freedom evaluates 184 economies across 12 components grouped into four categories: rule of law (property rights, judicial effectiveness, government integrity), government size (tax burden, government spending, fiscal health), regulatory efficiency (business freedom, labor freedom, monetary freedom), and market openness (trade freedom, investment freedom, financial freedom). Each component is scored 0 to 100 and equally weighted. The 2026 edition is the 32nd annual release. Atlas Brief cross-referenced Heritage's data with reporting from Morocco World News, 7News Morocco, and the North Africa Post. Regional peer scores are drawn from the Heritage Foundation's all-country dataset and World Population Review's 2026 compilation.

Sources

- Heritage Foundation, 2026 Index of Economic Freedom, released March 2026 - Heritage Foundation, Morocco country page, March 2026 - Morocco World News, "Morocco Ranks 83rd Globally in 2026 Index of Economic Freedom," March 19, 2026 - 7News Morocco, "Morocco climbs economic rankings, but remains 'moderately free'," March 2026 - North Africa Post, "Economic Freedom, Morocco ranks first in North Africa," March 2026 - Heritage Foundation press release, "United States Recorded Greatest Improvement Amongst Advanced Economies," March 2026