Concerns around growth in Morocco

CASABLANCA: Will growth be there this year in Morocco or will it stall? Difficult to answer when we know that the country’s economy is closely dependent on agricultural activity and therefore on rainfall. What is, on the other hand, certain, is that the “divine baraka” is slow to fall from the sky, after marking time with the few precipitations recorded at the beginning of December 2022.

According to forecasts for the next three months, the weather will not be good, thus aggravating the water stress from which the country already suffers. As of January 10, 2023, the dam filling rate reached only 31.5%, i.e. less than three percentage points than the previous year, a year which, it should be remembered, experienced an acute drought. Will farmers experience the same scenario?

Unlike the past year, the Moroccan economy will be more confronted with a continuous rise in inflation, high hydrocarbon prices, a drop in external demand, in addition to the repercussions of the Russian-Ukrainian crisis. . A concern confirmed by the World Bank which has just issued its growth forecasts on a global scale.

Sudden and lasting slowdown

The Bretton Woods institution has warned against a sharp and lasting slowdown for developing countries, including Morocco, lowering its forecast for global growth in 2023 to 1.7% against 3% expected six months ago. In the Middle East and North Africa (MENA) region, growth is expected to slow to 3.5% this year and 2.7% in 2024.

As for the Bank al-Maghrib (Central Bank of Morocco), growth is expected to be around 3% this year after a slowdown to 1.1% in 2022. “Growth is expected to accelerate to 3% this year, driven by the 7% increase in agricultural value added, assuming a return to average cereal production, while growth in non-agricultural activities should slow to 2.4%, suffering in particular from the deterioration of the external environment”, explains the Moroccan Central Bank.

However, these assumptions are uncertain, because they are based essentially on the good performance of the agricultural season. A cereal campaign whose beginnings are not brilliant. And to make matters worse, inflation will have to continue to register high rates for a much longer period than expected, warns the Central Bank.

“Inflation should stand at 6.6% in 2022, after 1.4% in 2021, driven mainly by the acceleration in the rise in the prices of food products and fuels and lubricants. It would then stand at 3.9% on average in 2023 before recording a new rebound in 2024 at 4.2%”, warns the same source.

Objective: price stability

Thus, to promote the return of inflation to rates in line with the price stability objective, Bank al-Maghrib decided to raise the key rate by one hundred basis points to 2.50%, between September and December 2022. An increase that will increase the interest rates of loans granted by financing organizations.

By wanting to contain the rise in inflation, the Central Bank will thus impact two main engines of growth because of the rise in the cost of credit: small and medium-sized enterprises (SMEs), which constitute nearly 90% of the economic fabric of the country, and individuals who contribute to the dynamics of internal consumption. The year 2023 does not start on an optimistic note for Morocco. Waiting for the clemency of the sky the next few weeks…

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