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Rabat – US credit rating agency Standard & Poor’s (S&P) on Friday confirmed that Morocco will keep its BBB- rating for its long and short-term credit while downgrading its economic outlook. The rating indicates that Morocco is currently able to meet its financial commitments. For short-term credit Morocco keeps its A3 rating, meaning poor economic conditions will likely impact the country’s credit.
Negative outlook
The current ratings come with a dire warning. S&P has revised Morocco’s economic outlook downward, from “stable” to “negative.” This means the country could see a downgrade in the next two years. If S&P downgraded Morocco to a BB rating, the country would lose its investment-grade status and have its credit labelled as risky.
S&P’s rating and outlook indicate Morocco is likely to feel the pain of the economic consequences of the COVID-19 pandemic for quite some time. Growing public debt is a main concern for rating agencies like S&P and Morocco would likely need to decrease its public debt in the near future if the pandemic’s economic consequences continue to hurt the economy.
If Morocco manages to improve its budget and see its debt shrink through a strong recovery, the agency could again adjust the country’s economic outlook to “stable.” S&P however expects budget deficits to increase despite a likely improvement in economic growth in 2021.
Economic Relaunch Pact
Morocco’s fate links heavily to the evolution of the global COVID-19 pandemic. If the global scientific community finds and distributes a vaccine in 2021 then S&P expects the country could achieve 4.5% GDP growth by seeing its economy rebound.
S&P indicated that Morocco is taking the right approach in dealing with its difficult economic outlook.
The ratings agency sees Morocco’s MAD 120 billion ($13 billion) economic revival plan as a solid strategy that promotes “private sector activity and [can] limit or, in some sectors, reduce the role of government in the economy.”
The $13 billion “Economic Relaunch Pact” signed on August 6 is an ambitious stimulus plan that represents 11% of Morocco’s GDP. The sum enters the economy through a recovery fund and state-guaranteed loans which have already helped more than 15,000 small businesses survive.
Ambitious approach
King Mohammed VI first announced the Economic Relaunch Pact in his July 29 Throne Day speech. The monarch stated that the plan placed Morocco “at the forefront of the most enterprising countries in terms of post-crisis stimulus packages.”
S&P appears to agree as it praised Morocco for its ambitious approach.
“Morocco has largely demonstrated political and social stability, especially after the Arab Spring,” the S&P statement reads. The US ratings agency commended Morocco for its constitutional reforms and increased public spending. S&P stated that public spending correctly focused on “economic development and a reduction in economic inequalities in less developed regions.”
