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Doha – Morocco’s central bank, Bank al-Maghrib, announced its second interest rate cut of the year on Tuesday, lowering the benchmark rate by 25 basis points to 2.5%, marking the lowest level since 2023.
The decision aims to support massive investment initiatives, including preparations for co-hosting the 2030 FIFA World Cup.
The central bank’s move, which brings rates to levels last seen in late 2022, reflects growing confidence in the country’s inflation outlook while acknowledging significant economic challenges.
The decision was made during the bank’s quarterly policy meeting, following an initial cut in June and a hold in September.
The rate reduction was motivated by inflation trends “in line with the price stability objective” and heightened geopolitical uncertainty, according to the central bank’s statement.
Market predictions had been divided, with an Attijari Global Research poll showing 45% of investors expecting a cut and the remainder anticipating no change. Similarly, Bank of Africa’s BKGR Research found 40% of respondents forecasting a reduction.
The central bank revised its growth forecast downward to 2.6% for 2024, compared to its previous projection of 2.8%, primarily due to challenging agricultural conditions.
The agricultural sector is expected to contract by 4.6% this year, with the bank noting that agricultural production “remains dependent on climate conditions surrounded by high uncertainty.”
Inflation projections show significant improvement, with the rate expected to average 1% in 2024, down from 6.1% in 2023. However, the central bank forecasts a slight increase to 2.4% in 2025.
Core inflation has stabilized at 2.4% year-on-year in November, remaining at its lowest level since July and aligning with the government’s 2% target.
The rate cut is expected to ease borrowing costs for major development projects, including preparations for the 2030 FIFA World Cup.
The total investment package is estimated at approximately $100 billion, encompassing various initiatives spanning World Cup infrastructure and stadiums, seawater desalination facilities, and renewable energy projects.
The package also includes reconstruction efforts in areas affected by the September 2023 Al Haouz earthquake and development projects in the Western Sahara region.
Despite agricultural challenges, other sectors of the economy are showing positive signs. Tourism has exceeded expectations, with the country recording 15.9 million arrivals in the first eleven months of the year.
The budget deficit has also shown improvement, contributing to the overall economic stability.
Morocco continues to face significant challenges from persistent drought conditions, which could impact both prices and supplies.
The current agricultural season (2024-2025) has experienced considerable delays and notably weak rainfall, suggesting another potential drought year.
This situation has led to record wheat import demands and threatens the country’s fruit and vegetable exports.
According to BKGR’s survey of local institutional investors, market participants unanimously expect one to two additional rate cuts in 2025.
This outlook reflects ongoing confidence in the central bank’s monetary policy approach while acknowledging the continuing challenges facing the Moroccan economy.
Read also: AfDB Accelerates Morocco’s World Cup 2030 Vision with $685 Million Investment
