Morocco’s central bank has cut its key interest rate to 2.25% to stimulate growth amid moderate inflation expectations. The economy is expected to grow by 3.9% this year with agricultural outputs slightly improving. However, the current account deficit is projected to rise significantly, though fiscal strategies may help manage the deficit in the coming years.
Morocco’s central bank has reduced its benchmark interest rate by 25 basis points (bps) to 2.25%, marking the second consecutive cut. This decision aligns with the current inflation outlook to stimulate economic growth and job creation. The bank has been following a monetary easing policy since June to support infrastructure investments in light of Morocco’s upcoming co-hosting of the 2030 World Cup.
The bank anticipates inflation, primarily driven by food prices, to remain moderate at 2% for this year and the next. However, this forecast carries uncertainties, largely due to geopolitical tensions and the potential effects of a prolonged drought on agricultural outputs, according to the bank’s quarterly meeting statement.
With an expected improvement in non-farming activities, Morocco’s economy is projected to grow by 3.9% this year, up from a previous growth of 3.2%. The forecasted grain harvest is approximately 3.5 million tonnes, slightly surpassing last year’s yield of 3.12 million tonnes but still below the average.
Despite the expected growth in the agricultural sector, continuous imports will push the current account deficit to 2.9% of GDP this year, up from 1% last year. The central bank forecasts that foreign exchange reserves will reach 391.8 billion dirhams ($40.5 billion) by the end of 2025, sufficient to cover 5.5 months of imports.
In terms of fiscal management, gains in tax revenues are projected to help mitigate increased investment spending, allowing for a decrease in the fiscal deficit from 4.1% last year to 3.9% in 2025 and 3.6% in 2026.
In summary, Morocco’s central bank has opted for a rate cut to 2.25% to foster economic stability and growth while managing inflation. The country’s economic growth is poised for improvement, despite challenges from agricultural production and a rising current account deficit. Foreign reserves are projected to be stable, and fiscal strategies aim to reduce the deficit in the next few years.
Original Source: www.tradingview.com
