Morocco entered the 21st century in economic decline. For much of the last century, state control of the economy had reduced the economy to shambles. However, the economic reform programs of the early 1990s have set the stage for partial economic recovery. Some progress has been achieved as the government has curtailed spending, increased privatization, reduced trade barriers, and stopped direct credit and foreign exchange allocation. In addition, Morocco's trade position should improve as its major trade partners in Europe experience growth and the economic recovery in Asia.
The pace of Morocco's economic reform program, however, has been rather slow. Despite major reform efforts, the public sector continues to be an important force in the economy. Long-term challenges include servicing the country's external debt , further privatizing state-owned enterprises, and attracting foreign investment. More important, the government is faced with the daunting challenge of improving living standards, which have steadily declined over the last few decades, creating new job prospects for the youth, who account for over 50 percent of the population. If left unresolved, the problem of unemployment may potentially become a source of political instability and a credible challenge to the regime.