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    Morocco’s Central Bank to Keep Interest Rate at 1.5%

    After an economic decline of -6.3% last year, Morocco’s economy expects to experience a solid rebound of 5.8% in 2021.

    07 Sep 2021

    Rabat – Morocco’s central bank, Bank Al-Maghrib (BAM), is expected to keep its rate steady at 1.5% in the second half of 2021, Attijari Global Research (AGR) forecasts.

    “Thanks to BAM’s monetary policy marked by a shrink of the interest rate at 1.5% and a focus on external financing with a record of $3 billion, the treasury financing cost has witnessed a significant decrease since 2020,” AGR said in a research report.

    According to some of BAM’s observations about inflation rate, the rate is expected to rise to 1.4% in 2022, while the consumer price index is on an uptrend for 2020, lining with the global trend.

    The estimated inflation rate originated from the rising prices of raw materials, primarily oil. The Brent oil price chart indicates an appreciation by more than 45% in the first half of 2021.

    BAM’s rate stability scenario seeks to keep the inflation rate under control. The report indicates that “Overall, the inflation rate in Morocco remains controllable.”

    “According to assumptions made under the 2021 finance law, the inflation rate would be around 1%, thus ruling out any risk of monetary tightening for BAM in the short term,” the report further stated.

    AGR analysts indicate that the control of food cost under an exceptional agricultural season combined with an economic recovery and less pressure in domestic demand could allow the Moroccan price index to remain moderate.

    External financing remains a key factor to estimate a stable bond rate for the rest of the year. However, the treasury’s external debt is expected to reach 26% in 2021, up from last year’s 24%.

    The health crisis brought the budget deficit to 7.6% of Morocco’s GDP in 2020.

    After surpassing the peak of contamination in August 2021 and successfully carrying out the vaccination campaign throughout Morocco, analysts and experts remain positive and confident that there will be a gradual recovery in the various sectors affected by the pandemic.


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