Morocco’s growth forecast dips despite rate cut

A general view of the Central Bank of Morocco in Rabat, Morocco, February 20, 2020. REUTERS/Youssef Boudlal

Morocco’s central bank, Bank Al-Maghrib (BAM), reduced its key interest rate by 0.25% to 2.75% on Tuesday.

This decision aligns with the bank’s forecast of significantly lower inflation in 2024.

Inflation is projected to fall to 1.5% this year, a significant drop from 6.1% in 2023. The bank attributes this decline to easing external pressures and lower food prices.

However, the gradual removal of cooking gas subsidies is expected to cause a slight rise in inflation to 2.7%.

Economic growth is also anticipated to moderate in 2024. BAM predicts a growth rate of 2.8%, down from 3.4% in 2023.

This slowdown is partly due to a decrease in agricultural output. Nevertheless, the bank forecasts a rebound to 4.5% growth in 2025, assuming an average cereal harvest.

Morocco’s current account deficit is projected to widen to 1.7% of GDP in 2024, compared to 0.6% in the previous year.

This is primarily due to a rise in energy imports.

Despite this, the country’s foreign exchange reserves are expected to remain healthy, reaching 382 billion dirhams ($38.4 billion) by year-end, sufficient to cover 5.5 months of imports.

The fiscal deficit is forecast to remain at 4.4% of GDP in 2024. Increased tax revenue is expected to balance additional spending on social safety nets and salary increases.

The bank predicts a slight improvement in the fiscal deficit to 4.1% of GDP in 2025.

Government debt is projected to rise to 70.1% of GDP this year, compared to 69.5% in 2023.

External debt is expected to represent 17.6% of GDP in 2024, rising to 18.2% or nearly 300 billion dirhams ($30 billion) in 2025.

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