Fitch Affirms Morocco’s BBB-Rating, with Stable Outlook

Fitch Ratings has affirmed Morocco’s long-term foreign-currency Issuer Default Rating (IDR) at ‘BBB-‘ with a stable outlook, praising the country’s macroeconomic stability, its comfortable external buffers and low share of foreign-currency debt in public debt.

The credit rating agency projects Morocco’s deficit at 3.7 pc of GDP in 2019 and 3.5 pc in 2020, saying the 2019 budget increases social spending.

Over the medium term, the Moroccan government expects to narrow the budget deficit by broadening the tax base and strengthening tax enforcement, containing the wage bill and achieving efficiency gains on social spending through improved targeting, explained Fitch in its analysis.

The Moroccan government is planning to cushion the impact of slower fiscal adjustment on the debt trajectory by resuming privatizations, with which it targets raising 4 pc of GDP in revenues over 2019-2024. It envisages tapping international markets in 2019 and 2020.

According to Fitch analysts, State guarantees are likely to rise under the government’s plan to boost investment spending through public private partnerships. Fitch forecasts steady net FDI inflows of 2 pc of GDP attracted by infrastructure upgrades, improvements in the business environment and incentives offered under the government’s industrialization strategy.

Morocco’s exchange rate volatility has remained muted following the broadening of the dirham’s floating bands to plus or minus 2.5 pc around its reference basket from plus or minus 0.3 pc in January 2018, despite limited market interventions from Bank al-Maghrib (BAM).

Fitch expects the authorities to follow a cautious approach to further widening the dirham’s trading bands, a stable economic growth to 2020 and a comfortable reserve coverage ratio thanks to the renewed $2.97 billion precautionary and liquidity line with the IMF.