Morocco’s central bank has cut its key interest rate by 25 bps to 2.25%. This reduction aims to promote growth and job creation in response to moderate inflation forecasts. Economic growth is expected to reach 3.9% this year, although the current account deficit is likely to rise. Foreign exchange reserves remain robust, and fiscal deficits are projected to decline in the next two years.
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 marks the second consecutive rate cut, aimed at aligning with the inflation forecast and fostering economic growth and job creation. The central bank has been pursuing an easing monetary policy since June to boost infrastructure investments as Morocco prepares to co-host the 2030 World Cup.
The central bank anticipates that inflation, primarily driven by food prices, will remain moderate at 2% for this year and the next. However, this forecast carries uncertainties related to geopolitical tensions and their effects on inflation, along with the condition of Morocco’s crops following a drought.
Economic growth is projected to be around 3.9% this year, up from 3.2% last year, depending on enhancements in non-farming activities. Additionally, Morocco’s grain harvest is expected to reach 3.5 million tonnes due to favorable late rainfall, slightly exceeding last year’s harvest of 3.12 million tonnes, though still short of average yields.
The current account deficit is projected to widen to 2.9% of gross domestic product (GDP) this year, up from 1% in 2024, as imports continue to surpass exports. Moreover, Morocco’s foreign exchange reserves are expected to reach 391.8 billion dirhams (approximately $40.5 billion) by the end of 2025, providing coverage for 5.5 months of imports. The central bank also noted that an increase in tax revenues will help reduce the fiscal deficit to 3.9% of GDP in 2025 and 3.6% in 2026, down from 4.1% last year.
In conclusion, Morocco’s central bank has taken strategic steps to lower interest rates to stimulate growth as the nation gears up for the 2030 World Cup. Despite moderate inflation forecasts, uncertainties persist due to geopolitical factors and agricultural challenges. Forecasts indicate a gradual economic improvement, although the current account deficit is a concern. Overall, fiscal measures may lead to a reduction in the deficit in the coming years.
Original Source: www.tradingview.com
