Morocco's market based economy is becoming increasingly diversified. Since the early 1980s, government has pursued an economic reform program supported by IMF. The government has restrained spending, revised the tax system, reformed the banking system, followed appropriate monetary policies, lifted import restrictions, lowered tariffs, liberalized the foreign exchange regime and encouraged foreign direct investments. A varied agricultural sector, a growing manufacturing sector, a large tourist industry (2 million in 1998), and considerable influx of funds from Moroccan workers abroad, all contribute to a strong economy.

After independence, the Kingdom of Morocco pursued two distinct development strategies. For the first 25 years after independence, the country adopted an inward-oriented development strategy. Then, after a series of economic crises in the early 1980s, Morocco shifted gears toward an IMF-supported liberalization strategy.

Between the period of 1956 and the early 1980s, Morocco was a poor agricultural economy. 71% of the population lived in rural areas, and 87% were illiterate. 29% of GDP came from agricultural output and 6% from mining, primarily phosphates (used in fertilizers). During this time, Morocco embraced an import-substitution strategy in both the industrial and agricultural sectors. The strategy was characterized by heavy government investment and high tariffs to promote industrialization. Morocco derived most of its revenues from exports of phosphates and agricultural crops, and state-owned enterprises. Rapid import growth and foreign borrowing caused external debt to rise from 35% to 84% of GDP. Financing requirements and external shocks in the early 1980s created balance of payments pressures and, in 1984, the country defaulted on its external debt.

However, since the early 1980s, the government has pursued an economic reform program supported by the IMF with an emphasis on fiscal and monetary tightening, wage restraint, and restoration of competitiveness. Price controls were removed and the government began to liberalize the economy. In 1996, Morocco signed an association agreement with the European Union to establish a free trade zone by 2010.

In the 1990s, economic performance was mixed as GDP continued to fluctuate with the unpredictable performance of the agricultural sector, which is heavily dependant upon rainfall. Between 1990 and 1998, growth averaged 2.9% (ranging from Ð6.6% in 1995 to 12.2% in 1996), but high population meant slow growth in per capita GDP. In 2004, Morocco's GDP was US$50.1 billion and per capita income was US$1,677. Real GDP growth of 3.7 percent reflected strength in energy and mining and, to a lesser extent, tourism.

Morocco has also signed a Free Trade Agreement with the United States of America and the European Union. The agreement with the United States has been ratified on July 22, 2004 in the United States Senate, by a vote of 85 to 13.