Morocco: Central Bank raises rates to 2.5 % & expects growth to reach 3pc in 2023

Morocco’s central bank has decided to raise its key rate by 50 basis points to 2.5pc due to inflation upward trends and external pressures that spread to non-tradable goods and services and to the implementation of the subsidy system reform starting 2024.

During last quarterly meeting held Tuesday in Rabat, the Board of Bank Al-Maghrib analyzed the recent evolution of the international economic environment and noted that it remains marked by the stalemate of the Russia-Ukraine conflict, the geopolitical and economic fragmentation and the aftermath of the pandemic.

Despite signs of deceleration in some countries, inflation remains very high overall, leading central banks to continue their largely synchronized tightening of monetary policy. As a result, the outlook for the global economy continues to deteriorate with a sharp deceleration in growth expected in 2023.

At the national level, this environment is weighing on Morocco’s economic activity and fueling inflation which is expected to reach 6.6 percent in 2022, after 1.4pc in 2021, driven mainly by a spike in food and fuels and lubricants prices. It would subsequently average 3.9pc in 2023 before rebounding to 4.2pc in 2024, in line with the planned decompensation of subsidized products.

Morocco’s central bank expects the country’s economic growth to slow down this year to 1.1% as a result of a 15% decline in agricultural value added and a 3.4% slowdown in the pace of non-agricultural activities.

In 2023, the Kingdom’s growth is expected to speed up to 3%, driven by the 7% increase in agricultural value added, under the assumption of a return to average cereal production, while growth in non-agricultural activities is projected to decelerate to 2.4 %, suffering in particular from the deterioration of the external environment.