Morocco’s Central Bank lowers key rate to 2.5 %; expects growth to rebound to 3.9 in 2025 & 2026

Morocco’s Central Bank has decided to reduce key rate by 25 basis points to 2.50 percent as inflation continues to evolve at low levels and is expected to end the year with an average of 1% compared to 6.1% in 2023.

The decision was made by the Board of the Bank during its latest quarterly meeting which analyzed domestic and global economic developments, as well as the Bank’s medium-term macroeconomic projections.

According to Bank Al-Maghrib’s projections, the country’s economic growth should be limited to 2.6 pc this year, after 3.4 pc in 2023, but would accelerate to 3.9 pc over the next two years, while non-agricultural growth is expected to remain stable at around 3.5 pc in 2024, before improving to 3.6 pc in 2025 and 3.9 pc in 2026.

Morocco’s agricultural value-added is expected to decline by 4.6 pc this year, before progressing by 5.7 pc in 2025 and 3.6 pc in 2026, assuming cereal harvests of 50 million quintals, equivalent to the average of the past five years.

Regarding foreign trade, after a quasi-stagnation in 2023, exports of goods are expected to gradually accelerate from 5.5 pc this year to 8.9 pc in 2026. This mainly reflects the continued momentum of sales in the automotive sector, which are expected to reach $20 billion in 2026, and the rebound in sales of phosphate and derivatives expected to be around $10 the same year.

Likewise, after a 2.9 pc decline, imports are set to rise by 4.6 pc in 2024, 7.9 pc in 2025, and 6 pc in 2026, mainly due to the expected increase in capital goods purchases associated with the implementation of numerous infrastructure projects.

Meanwhile, with the fall in international oil prices, the energy bill should contract by 6.9 pc this year, stabilize in 2025 and decline by 4.1 pc in 2026, to nearly $ 11 billion. Concurrently, travel receipts are expected to maintain their good performance, closing the year up by 9.1 pc and should continue to improve, to reach $ 12 billion in 2026.

Remittances are also expected to increase by 4.3 pc at the end of this year, before rising at an annual rate between 3 pc and 3.5 pc to reach $12 billion in 2026.

Given these developments, the current account deficit should remain contained at the equivalent of 1 percent of GDP in 2024, and below 2 pc of GDP over the next two years.