RABAT, March 22 – Morocco’s central bank kept its benchmark interest rate at an all-time low of 1.5% on Tuesday, saying its accommodative monetary policy was needed to shore up the economy amid inflationary pressures resulting from the war in Ukraine.
Driven by imported goods, inflation is expected to surge to 4.7% this year from 1.4% in 2021, before slowing to 1.9% next year, the central bank said in a statement following its quarterly board meeting.
The bank revised down its 2022 growth forecast to 0.7% from an earlier 2.9%, citing a severe drought that lowered prospects for this year’s cereals harvest to 2.5 million tonnes.
“These forecasts are shrouded in higher uncertainty,” Central Bank Governor Abdellatif Jouahri told reporters following the meeting.
Morocco’s economy grew by 7.3% last year, when the country harvested 10.3 million tonnes of cereals.
As imports continue to outweigh exports, Morocco’s current account deficit is expected to deepen to 5.5% of GDP in 2022, compared with 2.6% in 2021.
Key to Morocco’s hard currency inflow, tourism revenues are expected to recover to 47 billion dirhams ($4.8 billion) in 2022 and 80 billion in 2023 from 34 billion dirhams last year, when Morocco imposed travel bans on key tourist destinations to contain the COVID-19 outbreak.
Remittances from Moroccans abroad, which hit a record 93.3 billion dirhams last year, are seen dropping to 79.3 billion dirhams this year.
Morocco’s foreign exchange reserves are forecast to stand at 342.8 billion dirhams at end-2022, enough to cover 6.5 months of imports. The fiscal deficit would stand at 6.3% of GDP in 2022 and 5.9% in 2023. Morocco will not take the next phase in its dirham currency float process, wanted by the International Monetary Fund, “until small and medium-sized enterprises are well prepared”, Jouahri said, adding that the current context is “unpropitious” due to the pandemic and the fallout of the war in Ukraine.
In March 2020, Morocco widened the band in which the dirham fluctuates to 5% from 2.5%.
Government debt is expected to rise to 76.1% of GDP this year, from 74.8% last year. Non-performing bank loans ratio remains “manageable” at 8.7% in January from 8.4% in December, Jouahri said.
The treasury is also waiting for better market conditions to issue an international bond, he said, without offering further details. The current economic shocks could push Morocco to renegotiate a new precautionary liquidity line to deal with the fallout of the external shocks to the economy, he said.
Reporting by Ahmed Eljechtimi; Editing by Catherine Evans, Jan Harvey and Emelia Sithole-Matarise