Rabat – Fitch, an American rating agency, affirmed Morocco’s Long-Term Foreign-Currency Issuer Default Rating (IDR) rating at “BB+,” reflecting the country’s ability to meet its long-term fiscal responsibilities.
In a recent report, Fitch argues that Morocco’s stable economic outlook is supported by a “record of sound macroeconomic policies” that underpin its resilience to shocks.
The country’s strong official creditor support and comfortable liquidity buffers are also among the factors supporting its robust economy.
Morocco’s economy, however, suffers from lower-than-peer development and governance indicators, and high budget deficit and public debt. Morocco’s economy is equally highly exposed to adverse weather conditions.
Regarding the economic impact of the deadly September earthquake that claimed nearly 3,000 lives, Fitch forecast that its impact will be limited to 2023.
The report argues that the hardest-hit areas do not hold key industrial activities such as car manufacturing facilities.
The report further adds that earthquakes could have a negative impact on the post-COVID recovery of the tourism sector. However, the sector’s receipts have already reached above pre-pandemic levels.
Government spending in Morocco will continue to be high, the Fitch report shows. The American rating agency predicts that a central government (CG) deficit is set to reach 5% of GDP in 2023, down from 5.2% in 2022.
The reconstruction cost is also a significant challenge facing the country’s economy.
Reconstruction efforts will coincide with the start of a cash transfer program benefiting vulnerable households. The program aims to phase out costly subsidies (butane gas, sugar, wheat) estimated at 2.2% of GDP in 2023, down from 3.1% in 2022.
The report argues that construction efforts could increase the challenges to the implementation of the New Model of Development, which aims to increase social spending by 4% of GDP by 2025 to improve education and health and expand social benefits.
Fitch maintains that the country’s financing flexibility is supported by access to a large domestic investor base and strong official creditor support, which would help finance reconstruction-related costs and higher borrowing requirements.
Concerning economic growth, Fitch projects that a real GDP of 2.7% in 2023, triggered by a recovery in agriculture, and reconstruction efforts may provide a boost to economic growth in 2024 and 2025.
Growth is expected to reach 3.2% and 3.3% respectively in those years, due to infrastructure spending, strong industrial performances, and recovery in domestic consumption.
Morocco’s growth remains vulnerable to rainfall and its effect on agriculture yield.
Moreover, worsening global economic developments, increasing commodity price volatility and feeding inflationary pressures, as well as a slowdown in the eurozone are downside risks to the growth outlook.
Read Also: Fitch: Morocco’s Long-Term Foreign-Currency IDR Outlook Remains Stable at ‘BB+’
