Fitch: Morocco’s Long-Term Foreign-Currency IDR Outlook Remains Stable at ‘BB+’

Rabat – American rating agency Fitch has issued a report indicating that Morocco’s Long-Term Foreign-Currency Issuer Default Rating (IDR) stands at “BB+” with a stable outlook.

The report said that Morocco’s credit rating reflects a history of strong macroeconomic policies and a supportive institutional framework that has helped the country weather economic shocks.

Published on Friday, the rating was based on various “rating actions,” including credit fundamentals, economic rebound, high inflation, narrowing fiscal deficit, and governance, among others.

The rating described the North African country’s debt structure as favorable, with a moderate share of foreign-currency debt and a “comfortable external liquidity buffer.”

However, the ratings are limited by “weak” development and governance indicators, high public debt, a budget deficit larger than peer countries, and vulnerability to climate-related risks, particularly in the agriculture sector.

Morocco’s economic growth slowed in 2022 due to a severe drought that impacted agricultural output, underlined the report, but noted that it is expected to rebound in 2023 and 2024, driven by better agricultural performance and the industrial sector.

However, the country is expected to face downside risks fueled by high inflation, monetary policy tightening, slowdowns in key trading partners, and weather conditions. The report expects structural reforms to support investment and economic growth.

Inflation has been high in Morocco, peaking at 10.1% in February 2023, said the report. It was driven by food inflation and shortages in local supply caused by weather conditions and high production costs.

In order to stabilize domestic prices and ensure domestic supply, Morocco has implemented various measures, including temporarily restricting vegetable exports, according to the report.

In addition, Bank Al-Maghrib has increased Interest rates, with further hikes expected in 2023 to help reduce inflation.

Overall, Fitch said that Morocco’s rating reflects the country’s successful implementation of “coherent economic policies and a policy framework that has underpinned macroeconomic stability and supported resilience to shocks.”