Moody’s confirms improvement of Morocco’s financial outlook to stable

Credit rating agency Moody’s affirmed Morocco’s outlook to stable from negative while it maintained its long-term issuer at BA1.

Moody’s noted the recovery of Morocco’s real GDP to levels backed by solid crisis management capacities by the government during the pandemic, the agency said in a statement.

“The improved governance track record underpins Moody’s expectation that the government will be able to implement gradual fiscal consolidation that stabilizes the debt ratio and fiscal accounts, while maintaining social stability in the face of Morocco’s exposure to the food and energy price shock triggered by Russia’s invasion of Ukraine,” it said.

It said the BA1 rating was reflective of Morocco’s economic resilience and the build-up of significant foreign exchange reserves covering over six months of imports at the end of 2021, providing a buffer to absorb the impact of the global commodity price shock.

Morocco’s credit profile, however, “is constrained by higher general government debt levels than the median of Ba-rated sovereigns, Morocco’s exposure to contingent liabilities stemming from state-owned enterprises (SOEs), comparatively low income levels, and relatively subdued trend growth.”

The agency expects Morocco’s economy to grow 2% in 2022 and an average annual GDP growth to converge to 3-3.5% by 2025.

“The track record of coherent macroeconomic policies implemented in recent years and during the pandemic is reflected in improving government effectiveness indicators recorded in the Worldwide Governance Indicators, which support Moody’s assessment of Morocco’s improving governance profile,” it said.

Moody’s expects Morocco’s central government debt/GDP ratio to stabilize below 80% over the next three years (below 75% on a general government basis).