Fitch gives Morocco ‘BB+’ rating with stable outlook

Fitch agency has awarded Morocco ‘BB+’ rating consolidated with a stable outlook thanks to the country’s sound macroeconomic policies that has supported resilience to shocks, a favorable debt composition and a comfortable external liquidity buffer.

Economic growth slowed in 2022 to 1.2% from 7.9% in 2021, as agricultural output contracted by 15% due to a severe drought. “We project GDP growth will recover in 2023 to 3% supported by better agricultural output”, said the Rating agency.

In 2024, Fitch expects Morocco’s economic growth to increase to 3.2%, driven by the industrial sectors. Despite risks stemming from high inflation, monetary policy tightening, slowdown in key trading partners, and weather patterns, the implementation of key structural reforms will support investment and economic growth.

Inflation peaked at 10.1% in February (from an average of 6.6% in 2022), driven by food inflation (+20.1%), due to shortages in local supply as cold weather, water scarcity and high production costs affected agricultural output.

To stabilize domestic prices and ensure domestic supply, Morocco temporarily restricted vegetable exports, simplified the procedures for VAT exemptions on agricultural inputs and food products and plans additional subsidies for sugar beet farmers. Inflation eased in March to 8.2% and non-food prices also eased to 3.0% from 3.6% in February

Since September 2022, Bank-Al-Maghrib has increased its policy rate by 150bp to 3%. Fitch expects further interest rate hikes in 2023 and a decline of inflation to 5.0% in 2023, as a result of higher interest rates, falling global commodity prices and easing of supply shortages.

In 2024, inflation will fall to 3.7% although this will be above the medium-term average as the removal of gas subsidies could put pressures on prices, said the Fitch Ratings.