The Moroccan central bank (Bank Al-Maghrib – BAM) board decided in its last quarterly meeting of 2023 held on Tuesday to hold the key interest rate unchanged at 3%, while continuing to closely monitor economic conditions and inflationary pressures, both domestically and globally.
In terms of domestic inflation, the board observed a significant slowdown, which is expected to persist in the medium term. From its peak of 10.1% in February, inflation has gradually decreased to 4.3% in October and is projected to average 6.1 percent for the year, compared to 6.6 % in 2022.
Anticipating the dissipation of external inflationary pressures, the direct effects of tax measures outlined in the 2024 Finance Law, and the gradual reduction of subsidies outlined in the 2024-2026 medium-term fiscal plan–along with relatively stable volatile food prices–inflation is expected to sharply decrease to around 2.4% in 2024 and 2025. The underlying component of inflation is also expected to follow a similar trend, decreasing from 6.6% in 2022 to 5.6% in 2023, then to 2.4% in 2024, and 2.3% in 2025.
The Board also noted that medium-term inflation expectations, as reflected in BAM’s quarterly survey, continued to decline in the fourth quarter of 2023, and that the cumulative transmission of the last three key rate hikes to monetary conditions will bring back pre-pandemic numbers.
The global economic outlook remains generally unfavorable. Growth in major advanced economies is expected to be 2.4% in the USA this year but is projected to slow down to 1.1 % in 2024 before slightly improving to 1.7 % in 2025. In the euro area, growth is expected to be limited to 1% in 2023 and 0.9% in 2024, before accelerating to 1.9% in 2025. In the main emerging countries, the Chinese economy is expected to grow by 5.2% in 2023 and at a rate of less than 5% in the medium term, while in India, GDP is set to expand this year by 6.7%, by 5.9 percent in 2024, and by 6.3% in 2025.
The domestic agricultural sector is expected to see a 5% increase in value added in 2023, with further growth of 5.9 % in 2024 and 2% in 2025, assuming an average cereal production of 70 million quintals and continued strong performance in other crops. Non-agricultural activities are projected to experience a 2.5 % growth in value-added this year, followed by 2.7% in 2024, and a significant acceleration to 3.7% in 2025, driven by growth in the industrial and construction sectors. Overall, national economic growth is forecasted to reach 2.7% in 2023, with gradual improvement to 3.2 % in 2024 and 3.4 percent in 2025, following a 1.3 % growth in 2022.
In addition, the Board has approved Bank Al-Maghrib’s strategic plan for the 2024-2028 period, the Bank’s budget for 2024, the foreign exchange reserves management strategy, and the internal audit program. The Board has also scheduled its ordinary meetings for 2024 on March 19, June 25, September 24, and December 17.