Public debt and economic growth in Morocco: assessing short-run and long-run dynamics

This study investigates the relationship between total public debt and economic growth in Morocco, contributing to the limited country-specific evidence on African economies. Using a Vector Error Correction Model (VECM) with annual data from 1990 to 2024, we identify a stable long-run equilibrium linking real GDP growth to public debt and several macroeconomic determinants. Our findings reveal a substantial negative long-run debt coefficient (β=−1.08), indicating that each percentage point increase in the debt-to-GDP ratio is associated with a 1.08% point decline in trend growth. While growth adjusts rapidly toward equilibrium (α=−0.53), debt exhibits divergent behavior without policy intervention. Variance decompositions show that foreign direct investment and trade openness explain growth volatility more than debt shock. Bidirectional Granger causality between debt and growth suggests a potential debt–growth trap. These findings support the crowding-out hypothesis and highlight the potential growth dividends from credible fiscal consolidation in Morocco and similar African economies.