Moroccan Central Bank keeps benchmark interest rate unchanged at 2,25%

RABAT (Capital Markets in Africa) – Morocco’s central bank said on Tuesday economic growth would jump to 4.2 percent next year from an estimated 1.2 percent in 2016 on the back of sharply rising
agricultural output.

It made the bullish projections as it kept its benchmark interest rate unchanged at 2.25 percent.

Abnormally dry weather across North Africa slashed the cereal harvest last season to 3.35 million tonnes, down 70 percent from the previous record 11 million tonnes. Last year’s drought was the worst in 30 years, the government said.

But early season rainfall this year is up 22 percent from a normal year and 107 percent up from last year.

The bank, known as Bank al-Maghrib, revising down this year’s overall growth estimates from 1.4 percent.

It lowered its key rate to 2.25 percent from 2.5 percent in March, its first cut in more than a year, to support the economy, in which agriculture accounts for more than 15 percent.

The bank said it expected inflation to remain around 1.6 percent in 2016 and fall to 1 percent in 2017.

Based on an average global oil price of $43.1 a barrel, the current account deficit should reach 2.8 percent of gross domestic product in 2016, slightly higher than expected, and 2.1
percent in 2017.

The trade deficit widened by 18 percent to 166.03 billion dirhams ($16.43 billion) in the first 11 months of 2016, reflecting a significant rise in imports.

The bank said the budget deficit would narrow to 3.5 percent of GDP in 2016 if the government maintained its current fiscal policy, and fall to 3.1 percent in 2017, as planned by the
government in 2017 draft national budget.

Foreign exchange reserves will continue to increase, it said, though at a slower rate than previously expected, to stand at around six months and 21 days of import needs at the end of 2016, and seven months at the end of 2017.