Morocco's economy is facing potential risks due to the rising debt crisis in France and tensions in European bond markets, according to a report by BMCE Capital Global Research (BKGR). The report, titled "Quand les spreads européens parlent français," analyzes the consequences of the increasing sovereign risk premium in France, where public debt has reached 119% of GDP as of June 2026. This development has raised concerns about the potential impact on Morocco's economy.
France's public debt has reached €3.5955 trillion, or 119% of GDP, as of June 2026, up from 117.5% in the previous quarter. The debt has increased by nearly €60 billion in three months. The French government's budget plan for 2027 aims to reduce the public deficit from 5.4% of GDP in 2026 to 5% in 2027. However, the debt is expected to reach 121.7% of GDP next year. The rising debt has led to a significant increase in financing costs, with the state's debt charge expected to reach €72.9 billion in 2027, up from €59.3 billion initially planned for 2026.
The increase in France's sovereign risk premium has had a ripple effect on European markets. The yield on French 10-year bonds rose by 113 basis points to 4.862% in the third quarter of 2026. The spread between French and German bonds, known as the OAT-Bund spread, widened to around 125 basis points as of September, its highest level since 2012. These tensions have also affected the euro, which depreciated by 2.5% against the US dollar in September.
The risks associated with France's debt crisis and European market tensions are significant for Morocco. As the eurozone absorbs over 60% of Morocco's exports and is a major source of foreign direct investment, tourism revenue, and remittances from Moroccans living abroad (MRE), a prolonged economic slowdown in Europe could have a substantial impact on Morocco's economy. The sectors most likely to be affected include automotive, aerospace, and textiles.
A decline in European demand could lead to reduced orders for Moroccan companies, affecting the country's export-oriented industries. The tourism sector and remittances from MRE could also be impacted. Furthermore, as the dirham is pegged to a basket consisting of 60% euros and 40% US dollars, a sustained appreciation of the US dollar could increase the cost of energy imports and dollar-denominated raw materials.
The report by BKGR highlights the potential risks to Morocco's economy, including increased financing costs and reduced investment. The research firm expects France's elevated risk premium to persist until tangible budgetary or political improvements are made. If a crisis were to unfold, Morocco's economy could be affected through various channels, including trade, investment, and exchange rates.
In conclusion, Morocco's economy is exposed to risks associated with the French debt crisis and European market tensions. The country's strong economic ties with Europe, particularly the eurozone, make it vulnerable to any significant downturn in the region. As BKGR's report emphasizes, it is essential for Morocco to monitor developments in European markets and assess the potential implications for its economy.
Key points
- France's public debt has reached 119% of GDP as of June 2026.
- Morocco's economy is at risk due to its strong trade ties with Europe.
- A crisis in France could lead to increased financing costs and reduced investment in Morocco.
