Inflation and Monetary Policy: IMF and BAM in Agreement
Growth, inflation, employment… The IMF has released its forecasts for the Moroccan economy. They are generally optimistic. Economic activity is estimated to have expanded by 3.2% in 2024, with further acceleration to 3.9% in 2025—a forecast aligned with that of Bank Al-Maghrib (BAM).
Growth is expected to be driven by a rebound in agricultural production following recent droughts and sustained expansion in non-agricultural sectors, supported by strong domestic demand. A more robust economy is likely to push the current account deficit to around 3%, a level closer to its normal range, compared to its current low levels. Meanwhile, inflation is projected to stabilize at 2%. This economic acceleration is fueled by vigorous domestic demand and a new investment cycle across multiple sectors. However, risks to this outlook remain balanced, with significant uncertainty surrounding the economic impact of geopolitical tensions and climate change, according to an IMF team led by Roberto Cardarelli. Between January 27 and February 7, this team engaged in discussions with Moroccan authorities and Bank Al-Maghrib as part of the 2025 Article IV consultations. A detailed statement summarizing these discussions was published on February 10, 2025.
With inflation expectations anchored at around 2% and limited signs of demand-driven pressures, the IMF considers the current neutral stance of monetary policy to be appropriate. The fund agrees with Bank Al-Maghrib that any future adjustments to the policy rate should remain data-dependent.
As inflation has now returned to around 2%, BAM is encouraged to continue preparing for a transition to an inflation-targeting framework. In its meeting on December 17, 2024, BAM’s board decided to cut the policy rate by 25 basis points to 2.50%. Moving forward, the central bank will closely monitor economic conditions and make decisions on a meeting-by-meeting basis, using the latest available data. Its next meeting is scheduled for March 18, 2025.
What about the recent reforms of the tax system and tax administration? According to the IMF, they have helped broaden the tax base while reducing the overall tax burden. As a result, tax revenues in 2024 exceeded expectations, with the central government deficit reaching 4.1% of GDP, slightly lower than the 4.3% deficit projected in the 2024 budget. Although the 2025 budget maintains a gradual approach to fiscal consolidation, any additional revenue should be used to accelerate debt reduction, bringing it closer to pre-pandemic levels. To continue financing structural reforms, further efforts may be required to broaden the tax base and streamline expenditures. This includes: reducing transfers to state-owned enterprises (SOEs) as part of the ongoing public sector reform and expanding the use of the Unified Social Register to all social programs.
Fatim-Zahra TOHRY
