Bank Al-Maghrib Board of Directors/ Key rate unchanged and inflation expected to drop
The central bank has finally opted for the status quo. The key rate remains unchanged at 3%. The decision made by the Board of Bank Al-Maghrib (BAM) on Tuesday December 19 was expected, especially in view of the drop in inflation.
The pace of inflation, BAM’s main target, has slowed, and this trend is set to continue in the medium term. After peaking at 10.1% last February, inflation gradually decelerated to 4.3% in October, and is expected to end the year at an average of 6.1%, compared with 6.6% in 2022. Over the next two years, inflation is expected to fall sharply to 2.4% in 2024 and 2025. Its underlying component should follow the same trajectory, falling from 6.6% in 2022 to 5.6% in 2023, and then easing to 2.4% in 2024 and 2.3% in 2025.
In its analysis, the Board of Bank Al-Maghrib took into account the expected easing of inflationary pressures of external origin, the direct effects of the fiscal measures of the Finance Law 2024 and the gradual reduction elimination of the Government s subsidies for basic commodities provided for in the three-year 2024-2026 budget programming. The Board of Bank Al-Maghrib also assumed that prices of volatile food products would remain virtually stable. For the Board, the cumulative transmission of the last three decisions to raise the key rate to monetary conditions and the real economy continues.
In terms of growth, the central bank is forecasting a rate of 2.7% this year, compared with 1.3% in 2022. Its forecast is 0.7 points lower than that of the Government. The forecast is based on an improvement in agricultural value added of 5% in 2023 and 2.5% for other activities.
Growth should gradually improve to 3.2% in 2024 and 3.4% in 2025. In the 2024 Finance Bill, the Government is forecasting GDP growth of 3.7% next year.
In BAM’s view, agricultural value added would increase by 5.9% in 2024 and 2% in 2025, assuming average cereal production of 70 million quintals and the continuation of the trend performance of other crops. For non-agricultural activities, the rate of growth in value added is expected to reach 2.7% in 2024, before accelerating to 3.7% in 2025. These non-agricultural activities would be boosted by the expected upturn in the industrial and construction sectors.
The Board, which adopted Bank Al-Maghrib’s strategic plan for the 2024-2028 period and validated the foreign exchange reserve management strategy, also delivered its analysis of public finances.
At the end of November, ordinary revenues were up 2.2%, driven by higher tax revenues. At the same time, overall expenditure rose by 4%, driven by higher spending on goods and services and investment. Under these conditions, the budget deficit is expected to reach 4.8% of GDP, 4.5% in 2024 and 3.9% in 2025.
Khadija MASMOUDI
