Morocco’s central bank has cut its benchmark interest rate to 2.25%, the second reduction in succession, aimed at stimulating growth and job creation. While inflation is expected to remain moderate at 2%, economic growth is projected at 3.9% for the year. The current account deficit is anticipated to rise, although improved fiscal management could reduce the national deficit.
On Tuesday, Morocco’s central bank announced a reduction in its benchmark interest rate by 25 basis points, bringing it down to 2.25%. This is the second consecutive rate cut aimed at aligning with the inflation outlook and fostering economic growth and job creation. The bank’s decision comes amid ongoing efforts to stimulate investments in infrastructure, particularly in preparation for co-hosting the 2030 World Cup.
The central bank forecasts that inflation, primarily driven by food prices, will remain moderate at 2% for both this year and next year. This prediction, however, carries uncertainties due to external geopolitical tensions and the agricultural sector’s recovery post-drought conditions. These factors may influence inflation trends significantly moving forward.
Economic growth in Morocco is predicted to rise to 3.9% this year, up from 3.2% last year, if there is a positive turnaround in non-farming activities. The anticipated grains harvest is set at 3.5 million tonnes this year, benefiting from late rainfall, which is an improvement over last year’s 3.12 million tonnes but still falls below the historical average.
The current account deficit is projected to escalate to 2.9% of GDP in 2025, up from 1% in 2024, reflecting a continued trend where imports surpass exports. Furthermore, the bank estimates that Morocco’s foreign exchange reserves will reach 391.8 billion dirhams ($40.5 billion) by the end of 2025, sufficient to support 5.5 months of import expenses.
Lastly, enhanced tax revenues are expected to mitigate rising investment spending, reducing the fiscal deficit to 3.9% of GDP in 2025 and 3.6% by 2026, down from 4.1% last year. The measures being put in place indicate a strategic approach to fostering economic stability amidst various pressures.
In summary, Morocco’s central bank has strategically reduced the key interest rate to stimulate economic growth, projecting moderate inflation and an uptick in GDP growth. While domestic agricultural forecasts and import-export dynamics raise underlying uncertainties, improved fiscal management through anticipated tax revenues may facilitate a reduction in the national deficit. These actions reflect Morocco’s proactive stance in bolstering its economy, particularly in light of significant forthcoming events such as the 2030 World Cup.
Original Source: www.tradingview.com
