Economic dynamism alone is insufficient to curb the informal sector, according to PCNS economists

Economists Hamza Saoudi and Adnane Lahzaoui from the Policy Center for the New South PCNS discussed the informal sector in the Moroccan economy, highlighting that its role extends beyond mere statistics. Saoudi emphasized that the informal sector acts as a social safety net, absorbing individuals who cannot find formal employment, especially during crises like the COVID-19 pandemic. However, he noted that without state support, this stabilizing role could become destabilizing. Lahzaoui pointed out the difficulty in measuring the informal sector, with estimates ranging from 11.5% to 30% of GDP, depending on the definition and scope. He stated that the informal sector is not a marginal residue but a significant part of the daily economy, primarily concentrated in urban areas, particularly Casablanca, and focused on trade and services. A key finding from Lahzaoui is that the productivity of informal units is about half the national average, largely due to underinvestment in physical and human capital. This low productivity and incomplete structural transformation hinder the formalization process. Saoudi clarified that economic growth alone is insufficient to reduce informality, as evidenced by the modest decline in informal employment despite significant GDP per capita growth between 2000 and 2021. He also challenged the notion that informality stems from a lack of civic duty, arguing that economic agents respond to incentives, weighing costs, benefits, and regulatory frameworks