Board of Bank Al-Maghrib: Inflation and growth alert

The key rate remains at 1.5%! The Moroccan cen­tral bank (BAM) Board meeting on Tuesday, June 21 kept the rate unchanged while remaining attentive to developments in the situa­tion at the national and international level. The Board opted for the conti­nuation of an accommodating mone­tary policy in a situation marked by a great deal of uncertainty and galloping inflation. The central bank has also revised upwards its forecasts for both inflation and growth. Instead of 4.7% announced last March, inflation should stand at 5.3% before decelerating to 2% in 2023. Inflation is mainly driven by the surge in the prices of energy and food products as well as by its acceleration among Morocco’s main trading partners. Its underlying com­ponent would also rise to 5.2% before rising to 2.5% next year. To deal with this situation, the government, trade unions, and employers have signed a social pact which provides for a num­ber of measures: an initial increase in the minimum wage from next Septem­ber, an increase in family allowances for the third, fourth, and fifth children, and the promise of an overhaul of the Income Tax grid. Direct aid is granted to transporters, support is provided for the agricultural world, and the subsidy for butane gas, sugar, and soft wheat flour is continued. Moreover, in its forecasts, BAM took into account the impact of the decisions made within the framework of the social agreement of April 30, 2022. Growth, which had reached 7.9% of GDP in 2021, would not exceed 1% compared to a fore­cast of 0.7% in March. Such a level of growth is unlikely to create enough jobs and one can certainly expect a rise in the unemployment rate.

This slowdown is explained by the 15% drop in the agricultural value added, which should nevertheless improve by 12.9% in 2023 assuming an average cereal harvest of 75 mil­lion quintals. This year, the agricultu­ral campaign should record a cereal production of 32 million quintals, after 103.2 million quintals a year earlier. On the other hand, the value added of non-agricultural activities is expected to improve by 3.8% due to the easing of sanitary restrictions. It should return to its trend rate in 2023 with an increase of 2.8%. The Board also expects a budget deficit of 6.3% versus 5.9% in 2021. These projections take into account “the announced exceptional mobilization of resources through specific finan­cing mechanisms and monopoly revenues”. Moreover, at the end of May, ordinary revenues improved by 25.5%, driven by the increase in tax revenues and specific financing. At the same time, overall expenses increased by 16.6%, reflecting in particular the increase in the expen­ditures relating to the Government subsidies to basic commodities being consumed by Moroccan citizens. For its part, the current account deficit would widen to 4.9% versus 2.3% in 2021 and would drop to 3.8% next year. Exports would be up by 22% in 2022 and 0.8% in 2023 and will be driven by the increase in sales of phosphates and automobiles, which would stand at 102.7 billion and 114.7 billion MAD respectively, right from the next fiscal year. Im­ports would increase by 24.2% due to the soaring energy bill and pur­chases of raw products and semi-fi­nished products.  

Khadija MASMOUDI