Morocco: Growth projected at 4.5% over the medium term

RABAT (Capital Markets in Africa) – The International Monetary Fund projected Morocco’s real GDP growth to decelerate from 4.4% in 2017 to 3.1% in 2018, as agricultural production returns to its normal level following high output last year. But it expected growth to accelerate gradually to about 4.5% in the medium term and to remain favourable in case of improved external conditions and sustained reform implementation. Further, it forecast the inflation rate to average 1.3% in 2018 and to stabilize at about 2% in the medium term. It anticipated that the authorities’ plan to move to a more flexible exchange rate  regime  and  to  adopt  a  new  monetary  policy framework would help the economy absorb external shocks and remain competitive. But it considered that the growth outlook is subject to significant risks, including delays in implementing key fiscal and structural reforms, weaker-than-anticipated growth in the Eurozone, heightened geopolitical risks, as well as tighter global financial conditions.

In parallel, the IMF projected Morocco’s fiscal deficit to narrow from 3.5% of GDP in 2017 to 3% of GDP in 2018, and to stabilize at about 2.5% of GDP in the medium term, in case authorities broaden the tax base, continue to contain current spending below budgeted levels,  and  put  in  place  contingency  measures  to weather the potential shortfalls in grants. In this context, it projected the public debt level to regress from 64% of GDP in 2018 to 60% of GDP in 2021, as the government continues to maintain growth-friendly expenditures. In parallel, the Fund forecast the current account deficit to narrow from 3.7% of GDP in 2018 to about 3.1% of GDP in the medium term, mainly supported by sustained export growth, as well as higher tourism receipts and remittances, which would offset the decline in official grants, mostly from GCC countries. Also, it projected foreign currency reserves to remain at comfortable levels and to average $33.6bn over the medium term.