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After analyzing the recent economic developments and the bank’s macroeconomic projections for the next eight quarters, the Bank Al-Maghrib (BAM) Board decided to maintain its key interest rate unchanged.
“On the basis of these assessments, including those of inflation and growth trajectories in the medium term, the Council has decided that the current level of the 2.25% policy rate remains appropriate and has decided to keep it unchanged”, he said in a statement issued after the last quarterly session of the Council year held Tuesday, December 18.
During this meeting, the central bank noted that after a significant acceleration in the first half of the year, inflation declined, falling from 2.5% in June to 1.1% in October, mainly by the decline in volatile food prices.
According to Bank Al-Maghrib, “it should end the year on an average of 2%, after 0.7% in 2017, and return to 1% in 2019 and 1.2% in 2020. Its sub-component jacente, which measures the fundamental trend of prices, would continue to evolve to moderate levels, averaging 1.1% this year, to 1% in 2019 and reaching 1.6% in 2020”.
Based on data published by the High Commissioner’s Office (HCP) for the second quarter, the central bank noted that these indicate a level of activity below expectations.
According to BAM forecasts, which take into account these achievements and available sub-annual indicators, growth should thus reach 3.3% in 2018, after 4.1% in 2017, while agricultural value added would increase by 4.6% instead of 15.4% and the pace of non-agricultural activities is expected to increase slightly from 2.7% to 3.1%.
“In the medium term, nonagricultural growth would accelerate to 3.4% in 2019 and 3.7% in 2020, while, under the assumption of a return to an average cereal production of 80 million quintals, agricultural value added would fall by 0.8% in 2019, then increase by 3.3% in 2020,” said BAM, noting that overall national growth would be 3.1% in 2019 before increase to 3.6% in 2020.
In the labor market, she noted that the relative improvement in terms of job creation continued, with 122 thousand additional jobs between the third quarter of 2018 and the same quarter of 2017, concentrated mainly in services.
The participation rate, which accounts for a net inflow of 58 thousand jobseekers over the same period, dropped again from 45.5% to 45%.
“Under these conditions, the unemployment rate fell from 10.6% to 10% overall and from 14.9% to 14.3% in the cities. For urban youth aged 15 to 24 in particular, it has dropped from 45.2% to 44.7%,” said the central bank.
Driven mainly by the dynamics of the automotive sector and phosphates and derivatives, the bank noted the good performance of exports which was maintained over the first eleven months of the year, with an increase of 9.7% year-on-year, while imports increased by 8.8%.
“Travel receipts remained almost stable, while transfers from Moroccans living abroad declined by 1.7%. Under the assumption of a concretisation of the GCC grant inflows, planned at 4.8 billion dirhams in 2018 and 2 billion in 2019, the current account deficit would be accentuated to 4.4 percent of GDP at the end of the year, instead of 3.6% in 2017,” added BAM adding with regard to financial operations that the influx of FDI should reach the equivalent of 4.1% of GDP this year and 3.4% GDP over the next two years.
Referring to the state of public finances, BAM noted that budget execution at the end of October resulted in a deficit of 34.5 billion dirhams, a rise of 4.1 billion compared to the same period of 2017.
“Regular resources grew by 1.7%, reflecting improved tax revenues and a decline in donations. At the same time, overall spending increased by 2.4 percent, including increased compensation and increased spending on other goods and services,” she said.
Thus, she estimated, and under the assumption of the materialization of planned GCC grant inflows, the central bank estimates that the 2018 budget deficit has been maintained at 3.7 percent of GDP and that “it would continue to evolve around this level in the medium term, standing at 3.8% in 2019 and 3.6% in 2020”.
