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Rabat – Last week, Standard and Poor’s (S&P) released an analysis of the Moroccan economy that affirmed the kingdom’s national credit rating at a “stable” BBB – / A-3 despite the country’s low agricultural output this season.
“We expect economic activity to remain vulnerable to volatility in the agricultural sector and external demand fluctuations from Europe, notably in tourism,” the financial services company said in its April 8th analysis. “Nevertheless, investments in newly developed industries such as the automotive sector should improve economic diversification, and help GDP growth and exports over the medium term.”
In order to reflect the effects of this year’s weak agricultural production – largely caused by delayed, almost absent rainfall – the company more than halved Morocco’s expected economic growth for 2016 from their late-2015 estimate of 4.5 percent to less than two percent.
S&P said they maintained the credit rating expecting that promised public finance reforms, which would value the Moroccan dirham based on a flexible exchange rate instead of the current pegged-value system, would be implemented between the next 12 to 18 months.
On March 22nd, Bank Al-Maghrib, the North African country’s central bank, reduced the reserve requirement ratio for banks by 25 points to 2.25 percent. The credit rating agency said the decrease in the ratio – which determines the percentage of deposited money every bank is required to possess before making additional revenue-generating loans – accommodated the limited agricultural output the country suffered this season.
Morocco’s plans to increase phosphate production will help the economy’s standing internationally, S&P said, noting Europe’s slow-paced economic recovery, especially in France and Spain. Low global oil prices will help the net-importer country reduce its fiscal deficit from 4.3 percent in 2015 to 3.5 percent by the end of this year.
The kingdom’s chronically high youth unemployment rate, which stayed over 20 percent despite four percent economic growth in 2015, hinders the economy, according to the agency. The statement said the largest share of unemployed college graduates in Morocco comes from the structural differences between the talent available in the job market and the economy’s real needs.
