Moody’s Maintains Morocco’s BA1 Positive Ranking

Credit rating agency Moody’s maintained Morocco’s BA1 positive ranking, and noted that the country’s credit strengths reflect a structural shift towards higher value-added export industries and fiscal improvements, which could lead to stronger non-agricultural growth and a stabilization and gradual reduction in public sector debt.

“Morocco is strategically positioned within global value chains in the automotive and aviation sectors and as a trade hub between Europe and Africa,” said Elisa Parisi-Capone, a Moody’s Vice-President in a recently published report.

Parisi-Capone, Senior analyst at Moody’s and the report’s author, added that Morocco’s “gradual foreign-exchange rate liberalization introduced in early 2018 supports a gradual improvement in competitiveness.”

Moody’s also expects Morocco’s real GDP growth to decelerate this year to 3.2% from 4.0% in 2017, partially offset by a further acceleration in non-agricultural growth to 3.0% from 2.7% in 2017.

Non-agricultural growth will continue to be driven by the services sector and the phosphate mining industry. Last year was a record year for tourism, with arrivals exceeding 11 million for the first time, the report said.

Morocco’s moderate fiscal strength reflects the relatively high but affordable central government debt stock, Moody’s said, adding that the debt stock is expected to rise to 65.4% of GDP in 2018.

“The country’s relatively low foreign-currency exposure – at 22% of central government debt – mitigates the deterioration in its debt metrics by almost 20 percentage points of GDP from 2009 to 2017,” the report said.

Moody’s deemed that the main constraints on Morocco’s rating are relatively low GDP per capita, a volatile growth pattern and a relatively high, but affordable, debt-to-GDP ratio in addition to a weak labor market and skills mismatches, which limit the country’s competitiveness and constrain potential growth.