Rabat – Morocco’s banking sector is experiencing a positive moment and has been doing so for the past months, according to a recent BMI Research economic analysis. As monetary policy stabilizes in Morocco, interest rates will remain “firm” and “dovish” until 2019.
BMI analysts also predicted a “dovish” financial and monetary climate for the North African country, with Bank Al Maghreb (BAM), the country’s central bank, expected to maintain interest rates at 2.25 percent and 2.50 percent between late 2018 and 2019. Rates in previous years were higher, between 2.50 percent and 2.75 percent.
Domestic and external pressures
Despite BAM’s “hawkish” efforts to “keep interest rates firm” at a slightly lower level than previous years, recent hikes in commodity prices, including fuel and agriculture products, are likely to limit BAM’s leeway in formulating a monetary policy free of external pressure. The policy is especially impacted by rate policy in both the EU and the US.
“The BAM has limited scope to affect these price pressures by interest rate adjustments and is not typically hawkish in the face of higher in?ation, informing our expectation that it will hold the policy rate at 2.25 percent until end-2018,” the research group said in its forecast for Morocco’s monetary performance in 2019.
And while BAM’s policy has in great part been unaffected by the European Central Bank and the US Federal Reserve’s rates policy in 2018, economic analysts are apprehensive that prices and rates in external markets will have a more noticeable impact on BAM’s policy towards the end of next year.
Dirham devaluation good for exports
An expected devaluation of the dirham against the euro, for example, will profit Morocco by making its exports more competitive. At the same time, it will increase inflation as a result of higher costs on imports.
“As such, we expect the BAM to move in line with ECB policy in 2019, also raising its key policy rate,” the report explained.
For Moroccan consumers, however, there is some good news: should prices and rate adjustments unexpectedly skyrocket, the government is set to step in to alleviate the burden, “ease popular discontent,” and “support private consumption.”
The analyses and expert predictions come at a time that BAM deemed propitious for financial and banking business in Morocco. In terms of risk management, Morocco’s banking sector’s performance has been positive in recent months.
According to BAM’s 2017 annual report published Monday, July 23, Moroccan banks’ profits have unprecedentedly surged, with a notable decrease of 28.7 percent in risk-related costs and an average improvement of 17.6 percent in banks’ performances.
According to Hiba Zahou, BAM’s director of banking supervision, the country’s banking system has not witnessed such a positive outlook since 2008.
