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Bank Al-Maghrib maintains its key rate unchanged at 3%

The Board of Bank Al-Maghrib (BAM), meeting this Tuesday in Rabat, decided to keep the key rate unchanged at 3%

“In view of the high level of uncertainty linked to the evolution of the international situation and the national context following the earthquake, the Council decided to keep the key rate unchanged at 3%,” indicates BAM in a press release published at the end of the third quarterly meeting of its Board for the year 2023.

Thus, the council noted the clear deceleration of inflation which returned from a peak of 10.1% year-on-year in February to 5% in August, favored by the measures put in place by the government, the mitigation external pressures and the tightening of monetary policy.

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According to Bank Al-Maghrib's projections, this slowdown would continue, with inflation expected to fall from 6.6% in 2022 to 6% on average in 2023 then to 2.6% in 2024, specifies the press release, noting that its component underlying would experience a similar trajectory, going from 6.6% to 5.6% then to 2.3% respectively.

The Council also noted that both medium and long-term inflation expectations saw a significant drop in the third quarter of 2023 and took note of preliminary assessments which show that the transmission of its last three decisions to increase the rate key rate to monetary conditions and the real economy remains partial.

In terms of growth, the Central Bank Council forecasts a gradual improvement to 2.9% in 2023 then to 3.2% in 2024, excluding the consequences of the Al Haouz earthquake and the fallout from the measures reconstruction and recovery announced.

This development would be the result of an increase of 5% in agricultural added value in 2023 and of 5.9% in 2024 under the assumption of an average cereal production of 70 million quintals, reports the same source, noting that for non-agricultural activities, their rate of growth should slow down to 2.6% in 2023, followed by an acceleration to 3% in 2024.

In terms of external accounts, after the strong dynamics of the last two years, trade in goods would mark virtual stagnation in 2023 before a relative recovery in 2024, estimates BAM.

Exports should experience virtual stability in 2023, with in particular a significant decline in sales of phosphate and derivatives and sustained growth in those of the automotive sector. They would then firm up by 5.8% in 2024, essentially reflecting the planned resumption of exports of phosphate and derivatives which would reach 84.6 billion dirhams (billion dirhams) and the continued good performance of the automobile sector whose sales would rise. at 155 billion dirhams.

At the same time, imports would remain in 2023 at the same level as in 2022, with reductions in the energy bill to MAD 149.1 billion and acquisitions of semi-finished products, as well as an increase in purchases of consumer goods and equipment. They would record an increase of 2.2% in 2024, driven by increases in imports of semi-finished products and consumer goods.

Furthermore, taking into account the significant achievements during the summer period and the expected effect of the major international events that the Kingdom should host during the coming months, travel revenues would increase by 23.4% to 115.5 billion dirhams. in 2023, before showing a drop of 4.9% to 109.9 billion in 2024.

For their part, transfers from MREs should increase by 2.5% in 2023 and 3.6% in 2024 to reach 117.5 billion dirhams, indicates BAM, stressing that for FDI, revenues would remain at the equivalent of 3% of GDP in 2023 and 2024.

Under these conditions, the current account deficit would be around 2% of GDP in 2023 and in 2024 after 3.5% in 2022, estimates the Central Bank.

In total, and taking into account in particular the external financing carried out and planned by the Treasury, official reserve assets would stand at 361.8 billion dirhams at the end of 2023 then at 363.8 billion at the end of 2024, i.e. coverage for around 5 months and half of imports of goods and services.

As for monetary conditions, lending rates experienced a quarterly increase of 23 basis points to 5.26% in the second quarter of 2023, thus accumulating an increase of 102 points since the start of the monetary policy tightening cycle.

For its part, the liquidity need of banks should increase further under the effect of the increase in currency in circulation, reaching MAD 97.2 billion at the end of 2023 and MAD 113 billion at the end of 2024.

Taking into account these developments and the outlook for economic activity, bank credit to the non-financial sector would see its rate slow from 7.9% in 2022 to 3.1% in 2023 then improve to 4.6%. in 2024.

Regarding the real effective exchange rate, it would appreciate by 1.1% in 2023, the result of both the appreciation of its value in nominal terms and a level of domestic inflation higher on average than that partner countries and commercial competitors, and 1% in 2024 in line with its increase in nominal terms.

In terms of public finances, budget execution for the first eight months of 2023 shows an improvement of 4.9% in ordinary revenues, driven in particular by the increase in tax revenues.

At the same time, overall spending increased by 5.9%, reflecting the increase in investment spending, spending on goods and services and the interest charge on the debt.

Taking into account in particular these achievements and the expected development of economic activity, the budget deficit should, according to BAM projections, ease slightly from 5.2% of GDP in 2022 to 5.1% in 2023. and 4.9% in 2024.

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