Bank Al-Maghrib opts for the status quo regarding the key rate. This is a strong signal since by prioritizing growth to the detriment of lower inflation, the Central Bank is maintaining its accommodative monetary policy to continue supporting economic activity.
As expected, BAM was ultimately not tempted to contain inflation to the detriment of growth. The Central Bank, which held its second quarterly meeting of the year on Tuesday, June 21, opted for stability by keeping the key rate unchanged at 1.50%, at least for the next three months. It will be able, at the end of this period, to adjust its action, since it continues to “closely follow the evolution of the national and international situation”.
Precisely, the Moroccan economy is facing an unfavorable environment and climatic conditions which will impact a growth already in strong deceleration this year. All exacerbated by inflationary pressures from all sides. Nevertheless, the banking regulator, which has already factored into its forecasts the impact of the rise in the minimum wage – decided upon within the framework of the social agreement of April 30, 2022 – and has taken into account the nature of inflationary pressures, essentially external sources, as well as the expected return of inflation to moderate levels in 2023, maintains the accommodative stance of its monetary policy.
The goal is obviously laudable. It is necessary at all costs to continue to “support economic activity”. An activity particularly shaken by the soaring prices of energy and food products induced by the acceleration of inflation in Morocco’s main trading partners.
This was therefore reflected in the sharp increase (+4.5% year-on-year) in consumer prices at the end of April. The situation should not improve anytime soon. BAM expects inflation to continue rising in the short term.
“Inflation should reach 5.3% for the whole of this year before decelerating to 2% in 2023”, projects BAM at the end of the Council which details that “the underlying component of inflation would reach 5 2% in 2022 and then return to 2.5% next year”.
On the agricultural side, the Central Bank forecasts, due to unfavorable weather conditions, a 69% decline in cereal production in 2022 to 32 million quintals (MQX). Enough, according to the issuing institute, to bring down the agricultural added value by 15% this year. Assuming an average cereal harvest of 75 MQX in 2023, agricultural VA should improve by 12.9% in 2023.
On the non-agricultural sector, BAM estimates that growth should consolidate at 3.8%. Taking advantage of the easing of health restrictions, it could regain this pace in 2023 with an increase of 2.8%. Under these conditions, the Central Bank predicts a slowdown to 1% in GDP growth in 2022 before a possible acceleration to 4% in 2023.
With regard to external accounts, the 24.2% increase forecast for 2022 is closely linked to “the increase in the energy bill which would reach 122.4 billion dirhams (MMDH) and the planned increase in the purchase of products raw and semi-finished products. BAM estimates that this increase will be reduced to 0.3% in 2023 when a significant drop in the energy bill is expected.
The improvement in exports is estimated at 22% in 2022 and 0.8% in 2023, the latter being largely driven by sales from the phosphate and derivatives and automotive sectors (102.7 and 114.7 billion dirhams, respectively) .
In this wake, travel receipts should gradually recover, rising from 34.3 MMDH in 2021 to 54.3 MM in 2022 and 70.9 MM in 2023. Following the same trend, transfers from MREs would gradually return, according to BAM , at their pre-crisis level, totaling 87.3 billion dirhams in 2022 and 84 billion dirhams in 2023.
Consequently, the current account deficit should reach 4.9% of GDP in 2022, after 2.3% in 2021, before returning to 3.8% in 2023. FDIs should see their receipts approach the equivalent 3% of GDP over the forecast horizon.
Thus, the banking regulator is counting on official reserve assets of 342.5 billion dirhams for 2022 and 346.4 billion dirhams for 2023 on the assumption of the materialization of the provisional external financing of the Treasury, in particular. Enough to provide coverage for around six months of imports of goods and services.
Budget deficit: Widening in 2022 before reduction in 2023
In terms of public finances, according to the budget execution for the first five months of the year, there is an improvement of 25.5% in ordinary revenue. The increase in tax revenue and specific financing have a lot to do with it.
Conversely, overall expenses increased by 16.6% due to the increase in the compensation charge. Consequently, BAM expects the budget deficit to widen to 6.3% of GDP in 2022 before easing to 5.6% in 2023.
These forecasts take into account, in particular, the achievements and the exceptional mobilization of resources announced through the specific financing mechanisms and the revenue from monopolies.
Moulay Ahmed Belghiti / ECO Inspirations