The evaluations follow Fitch Ratings’ latest revision of Morocco’s outlook from “stable” to “negative” on April 28, due to the coronavirus crisis.
Rabat – International ratings agency Fitch Ratings has downgraded three Moroccan banks’ outlooks from “stable” to “negative.”
The study included Attijariwafa Bank (AWB), BMCE Bank of Africa (BOA) and Credit Immobilier et Hotelier (CIH).
The evaluations follow Fitch Ratings’ latest revision of Morocco’s outlook to “negative” from “stable” on April 28, due to the coronavirus crisis.
Fitch Ratings indicated that AWB and BOA are classified as domestic systemically important banks (DSIB) in Morocco, and believes that the government would have a high propensity to support them if needed.
However, the ratings agency classifies the overall probability of Moroccan support as moderate, given the negative repercussions of the pandemic on Morocco’s economy.
Despite Morocco’s proactive response to address the negative shocks of the pandemic, Fitch expects the Moroccan economy to contract 4.5% in 2020. The agency also predicts general government debt to rise to 58% of GDP in 2020 from 52.5% in 2019.
If the projection proves true, it will interrupt 22 successive years of growth.
In response to the pandemic’s impact, Morocco for the first time drew funds from the credit line the IMF made available in 2018. The $3 billion credit represents 3% of the country’s GDP.
Morocco’s decision follows its recent removal of the limit on foreign borrowing, which aims to fulfill the country’s need for foreign currency given the pandemic’s impact on several sectors.
Tourism represents 11% of Morocco’s GDP, meaning the suspension of all non-essential activity since mid-March led to a sharp loss in the sector’s economic activity and prompted job losses.
The state of health emergency’s economic activities suspension also hit the informal sector particularly hard. This led the government to allocate financial aid to 4.3 million informal workers as of April 27.
Suspended activities in both the tourism and informal sectors contributed significantly to Morocco’s temporary economic decline.
While Fitch Ratings now forecasts a more grim outlook for 2020, the European Bank for Reconstruction and Development (EBRD) expressed confidence that Moroccan GDP will see a rebound of 4% in 2021.
Non-agricultural activities may help to sustain the expected growth, according to EBRD. Mining could provide a particular boon, given that Morocco is the world’s second-largest phosphate producer, after China, and the world’s largest exporter.