Bank Al-Maghrib Leaves Key Interest Rate Unchanged at 3%

Rabat – Morocco’s central bank, Bank Al-Maghrib (BAM), announced today that it will not raise interest rates, signaling a pause in its tightening cycle of monetary policy.

The decision by the board of Bank Al-Maghrib comes after three consecutive rate hikes, totaling 150 basis points, and aims to maintain stability by keeping the key rate unchanged at 3%.

BAM cited various global economic developments and prospects, which continue to be marked by significant uncertainty, especially considering the implications of the conflict in Ukraine.

The board highlighted the gradual decline of inflation in major advanced economies due to lower energy and food prices, although it remains above the targets set by central banks.

In its upcoming meetings, the board will consider the cumulative effects of previous rate increases, as well as the impact of government measures aimed at supporting economic activities and household purchasing power.

Inflation Projections and Economic Growth

BAM‘s board reviewed recent economic trends and examined the bank’s medium-term macroeconomic projections.

Inflation in Morocco reached a peak of 10.1% in February 2023 but has since decelerated. But it still remains relatively high, with inflation rates reaching 8.2% in March, 7.8% in April, and 7.1% in May.

Based on these figures, inflation is projected to average 6.2% for the year 2023 and is expected to further decrease to 3.8% in 2024. The underlying inflation component is anticipated to follow a similar trajectory, declining from 6.6% in 2022 to 6.1% in 2023 and reaching 2.9% in 2024.

The Moroccan economy has faced challenges due to two consecutive years of drought and an unfavorable external environment, BAM noted.

Meanwhile, BAM expects growth in agricultural value added to be limited to 1.6% in 2023, following a contraction of 12.9% in the previous year. Assuming a cereal harvest of 70 million quintals in 2024, agricultural growth is forecasted to increase by 5.5%.

For non-agricultural sectors, value-added growth is projected to slow down from 3% in 2022 to 2.5% in 2023, before picking up to 3.2% in 2024. Overall, Bank Al-Maghrib forecasts the national economy to grow by 2.4% in 2023, showing improvement from the 1.3% growth in 2022 and further strengthening to 3.3% in 2024.

External Accounts and Trade Outlook

Regarding external accounts, trade in goods is expected to decline this year following the momentum recorded in 2022.

Exports are projected to decrease by 2.8%, mainly driven by lower sales of phosphate and derivatives. However, exports are anticipated to rebound with 6% growth in 2024, supported by increased shipments from the automotive sector.

Import volumes are forecast to decrease by 2.2% in 2023, primarily due to a decrease in energy costs; but they are also expected to rise by 2.9% in 2024 due to an increase in purchases of finished consumer goods and capital goods.

The tourism sector is expected to continue its recovery, leading to a 14.9% increase in travel revenues, reaching MAD 107.6 billion ($10,7 billion) in 2023. These revenues are expected to remain relatively stable in 2024.

Remittances, although subject to uncertainty, are anticipated to show a positive trend in the medium term, with annual increases of around 3.5% to reach MAD 114.7 billion ($11,4 billion) in 2023 and MAD 118.7 billion ($11,8 billion) in 2024.