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BAM Council: Budget deficit alert

The Central Bank’s macroeconomic picture identifies two weaknesses: the slowdown in GDP growth to 2.7 percent in 2019 compared with 3.1 percent in 2018 and the slippage in the fiscal deficit.

Next year, growth may pick up slightly and rise to 3.9%. It remains structurally weak with a volatility linked to rainfall and therefore to the performance of the primary sector. This could even increase frustration and discourage young people and women from entering the labor market, two categories that are particularly affected by unemployment.

A cereal production of 60 million quintals and a decline in agricultural value added of 3.8% are expected this year. It should increase by 6% in 2020, under the assumption of a harvest around 80 million quintals. The pace of non-agricultural value added should continue to improve, but slowly to reach 3.4% in 2019 and 3.8% in 2020.

It was not until the Bank Al-Maghrib Council on Tuesday, March 19 to get an idea about the budget deficit of 2018. It thus stood at 3.7% of GDP against 3% provided for in the finance law. His situation is not expected to improve this year. Excluding privatization, it is expected to reach 4.1% of GDP before falling to 3.5% in 2020.

The central bank, which kept the key rate unchanged at 2.25%, believes that over the medium term “the process of fiscal consolidation should slow down”. The current account deficit widened further to 5.2 percent in 2018 from 3.6 percent of GDP a year earlier.

Exports were strong, particularly phosphates and by-products, automobile manufacturing and agricultural and agri-food products. At the same time, imports were marked by an increase in the energy bill and an increase in purchases of capital goods.

A small improvement is expected this year since the current account deficit is expected to reach 4.1% in 2019 before falling back below 4% in 2020 to reach 3.4% of GDP. These forecasts are based on the assumption of a decline in energy imports and decelerating purchases of capital goods. They also take into account donations from Gulf Cooperation Council countries of 2 billion dirhams in 2019 and 1.8 billion in 2020.

FDI receipts, which reached 4.1% of GDP in 2018, are expected to fall to 3.4% of GDP in 2019 and 2020. But international outflows should bring international reserves to 239 billion dirhams. year against 231 billion in 2018. Next year, they would be 236 billion to ensure a little more than 5 months of imports of goods and services.

Despite relatively low interest rates, credit still does not take off. Credit growth in the financial sector slowed to 3.1% in 2018 marked by a slowdown in loans to private companies. A pace that should not change in 2019 before accelerating in 2020. Maybe by then the confidence would return.

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