Stylized map of Morocco symbolizing economic growth through public expenditure and good governance.

Unlocking Morocco's Economic Potential: How Smart Public Spending and Good Governance Drive Growth

Elliot Brynn in Business & Economy August 2025 • 4 min read.

"Discover how strategic investments and effective governance are key to boosting Morocco's economic future, ensuring sustainable prosperity for generations to come."

In today's interconnected world, a nation's economic health hinges on various factors, with public finances and governance playing pivotal roles. For Morocco, a country striving for sustainable growth, understanding the impact of public expenditure and the quality of governance is paramount. Like many nations, Morocco has faced economic headwinds, including recessions that have strained public finances, leading to increased deficits and debts. Tackling these challenges requires a strategic approach that goes beyond simply cutting costs.

Consolidating public finances and reducing public debt relative to the economy's size are critical, especially as demographic shifts, such as an aging population, place additional pressure on public resources. Correcting budgetary deficits and implementing coherent policies are essential to prevent further strain on public expenditure. The state must wield fiscal policy effectively, avoiding both overspending and mismanagement, to ensure that public expenditure supports rather than hinders economic activity.

This article delves into the intricate relationship between public spending, governance, and economic growth in Morocco, drawing insights from a study published in the International Journal of Economics and Finance. It highlights how the Moroccan government can optimize public expenditure through improved governance, fostering an environment conducive to long-term economic prosperity.

The Vital Link: Public Spending, Governance, and Growth

Stylized map of Morocco symbolizing economic growth through public expenditure and good governance.

The study aimed to evaluate the impact of public expenditure on Morocco's economic growth while assessing how good governance influences the effectiveness of this spending. Using the Error Correction Model, an econometric approach developed by Johansen, the research revealed that good governance remains the most effective way for the Moroccan government to achieve significant macroeconomic performance. Specifically, the budgetary component of total public expenditure has a long-term positive impact on economic activity.

Investing in governance proves to be a sound strategy for Morocco, offering low-cost, long-term benefits. Good governance enhances the effectiveness of budgetary policy, exerting a positive and significant effect on economic activity. Several key factors underscore the importance of this relationship:

Fiscal Policy's Role: Fiscal policy is a crucial instrument for regulating economic activity and mitigating the impact of economic shocks.
Keynesian Influence: Drawing from J.M. Keynes's theories, public spending is recognized as an exogenous factor that can significantly impact growth and development.
Governance as a Catalyst: Good governance improves the allocation and utilization of public funds, ensuring that resources are directed toward productive investments.
Transparency and Accountability: Budget transparency and accountability of public authorities foster public support for productive programs, reducing waste and corruption.

The findings align with endogenous growth theory, which emphasizes the role of public investment in long-term economic growth. Several models within this theory highlight different engines of growth, including the accumulation of knowledge and technological capital (Paul Romer), human capital (Lucas), and public infrastructure (Barro). In Morocco, promoting efficient management and sparing use of public expenditure is particularly important due to the scarcity of resources in developing countries. The government must prioritize the quality of public expenditure to maximize its impact on economic growth.

A Path Forward: Investing in Governance for Sustainable Growth

In conclusion, the study underscores the importance of strategic public spending and good governance in driving Morocco's economic growth. By prioritizing investments in governance, the Moroccan government can unlock the country's full economic potential and ensure sustainable prosperity for generations to come. This requires a commitment to improving democratic institutions, protecting private property rights, strengthening regulatory frameworks, combating corruption, and fostering an environment conducive to long-term economic stability.

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This article is based on research published under:

DOI-LINK: 10.5539/ijef.v9n4p12, Alternate LINK

Title: Impact Of Public Expenditure On The Growth In Morocco: Role Of Governance

Subject: Energy Engineering and Power Technology

Journal: International Journal of Economics and Finance

Publisher: Canadian Center of Science and Education

Authors: Tlaytmaste Bahaddi, Mohamed Karim

Published: 2017-03-07

Everything You Need To Know

Why are public finances and governance so critical for Morocco's economic future, especially when facing economic challenges?

In Morocco, public finances and governance are very important for sustainable economic growth. Dealing with economic problems like recessions means more than just cutting costs; it involves handling deficits and debts strategically. As the population ages, there's even more pressure on public resources, so it's essential to fix budget issues and implement clear policies to prevent overspending and mismanagement. Effective fiscal policy is necessary to ensure that public expenditure supports economic activity.

How did the study evaluate the relationship between public expenditure, governance, and economic growth in Morocco, and what were the key findings regarding governance?

The study used the Error Correction Model, an econometric approach developed by Johansen, to assess how public expenditure impacts Morocco's economic growth and how good governance enhances the effectiveness of this spending. It found that good governance is the most effective way for Morocco to achieve significant macroeconomic performance, with the budgetary component of total public expenditure having a long-term positive effect on economic activity. Investing in governance is a sound, low-cost, long-term strategy.

In what ways does good governance specifically enhance the effectiveness of public expenditure and contribute to economic activity, drawing on economic theories?

Fiscal policy is crucial for regulating economic activity and buffering against economic shocks. Drawing from J.M. Keynes's theories, public spending can significantly impact growth and development. Good governance improves how public funds are allocated and used, directing resources toward productive investments. Additionally, budget transparency and the accountability of public authorities boost public support for productive programs, reducing waste and corruption, enhancing overall economic activity.

How do the study's findings align with endogenous growth theory, and what implications does this have for Morocco's approach to public expenditure?

The findings support endogenous growth theory, emphasizing public investment's role in long-term economic growth. Various models highlight growth engines like knowledge accumulation, technological capital (Paul Romer), human capital (Lucas), and public infrastructure (Barro). For Morocco, efficient management of public expenditure is critical due to resource scarcity. The government must prioritize the quality of public expenditure to maximize its impact on economic growth.

What key actions should Morocco prioritize to improve governance and ensure sustainable economic prosperity for future generations?

By prioritizing investments in governance, Morocco can unlock its full economic potential and ensure sustainable prosperity. This involves a commitment to improving democratic institutions, protecting private property rights, strengthening regulatory frameworks, combating corruption, and fostering an environment conducive to long-term economic stability. These steps are vital for optimizing public expenditure and driving sustainable growth.