Morocco's central bank maintained its key policy rate at 2.50 percent, saying inflation is expected to remain subdued and average 1.4 percent this year and by the second quarter of 2016.
The Bank of Morocco, which cut its rate by 50 basis points in 2014, added that the country's economy was expected to expand by 5.0 percent in 2015, higher than its previous 4.4 percent forecast, from 2.5 percent last year due to good crops and a continued improvement in the non-agricultural sector.
The inflation forecast for 2015 is slightly higher than the central bank's forecast in December when it forecast 1.2 percent inflation and 1.3 percent in the first quarter of 2016.
Morocco's consumer price inflation rate eased to 1.3 percent in February from 1.6 percent in January for an average of 1.5 percent in the first two months, up from 0.4 percent 2014.
However, the central bank added that the downward trend in industrial producer prices, which started in January 20134, had intensified in recent months, with prices falling by 6.4 percent in January as compared with an average decline of 2.9 percent in 2014.
Last month news agencies reported that Morocco's government was proposing a draft law that would give the central bank more independence at a time that the country is preparing allow Islamic banks to be set up and increase the flexibility of its exchange rate system by allowing the use of foreign exchange reserves to defend the dirham so it can better absorb external shocks.
The Bank of Morocco issued the following statement:
"1. The Board of Bank Al-Maghrib
2. At this meeting, the Board examined recent economic, monetary and financial developments
and inflation forecasts up to the second quarter of 2016.
3. At the international level, the Board noted that
the euro area improved slightly
economy continued to grow strongly,
compared to 2.7 percent in the third
particularly in the United States
Unemployment rate in the euro area reached
previous month. In the main emerging
India, while Brazil’s third quarter
European Central Bank (ECB)
0.5 point to 1.5 percent for 2015 and by 0.4 point to 1.9 percent for 2016.
the Federal Reserve slightly lowered
percent for 2015 and 2016. In
level of June 2014, despite their decrease in February
to remain slightly below $60 a
euro area eased from -0.6 percent to
States was slightly negative in January after
monetary policy decisions, the ECB
start its new larger purchase program
maintained the federal funds rate
forward guidance, indicating that an increase in the target range remains unlikely at
meeting. Overall, the low levels of growth and inflation
’s main trading partner, coupled with the downward trend in oil
prices, indicate the absence of external inflationary pressures.
4. For the full year 2014, GDP growth would remain around 2.5 percent and available data show that it would reach 5.0 percent in 2015, driven by continued recovery in nonagricultural agricultural value added. In the labor market, the unemployment rate in the third quarter was up 0.5 percentage point year on year to 9.6 percent, despite a 0.3 decrease in the labor force participation rate. Altogether, nonagricultural output gap negative, suggesting the absence of demand-led inflationary pressures.
5. Regarding external accounts, trade deficit narrowed further, posting a year-on-year decline of
37.2 percent as at end-February, after decreasing by 6.4 percent in 2014. Imports were down 15.2
percent, particularly as the value of energy purchases fell by 45.2 percent. On the opposite,
exports rose by 8.2 percent, mostly driven by higher sales of phosphates and derivatives,
automotive and food industries. Concerning the other current account items, travel receipts were
down 8.2 percent as at end-February, after virtually stabilizing in 2014, while remittances of
Moroccan expatriates were up 6.9 percent, after rising 2.3 percent. Taking account of these
developments and assuming an average oil price of $60 a barrel, current account deficit would
decrease to about 4 percent of GDP in 2015, from 5.9 percent in 2014. Moreover, considering
the 15.2 percent decline in net foreign direct investment, after increasing by 7.8 percent in 2014,
the stock of net international reserves stood at 182.4 billion dirhams as at end-February,
providing coverage for 5 months and 13 days of goods and services’ imports. It is expected to
improve further in 2015 to equal more than 6 months of imports.
6. After a deficit of 4.9 percent of GDP in 2014, fiscal balance showed a deficit of 13.4 billion
dirhams as at end-February 2015, down 5.6 billion year on year. Ordinary income decreased by
2.3 percent, largely reflecting lower receipts of domestic consumption tax and import VAT.
Overall expenditure shrank by 10.8 percent, mainly on a 64.3 percent reduction in subsidy costs
to 2.6 billion dirhams.
7. On the monetary side, after rising by 6.6 percent as at end-December 2014, M3 growth
accelerated to 7.4 percent in January. However, money gap remains negative, suggesting the
absence of money-driven inflationary pressures. Bank lending expanded by 4.3 percent, up from
2.2 percent in December 2014, and would grow by nearly 5 percent for the full year 2015. In the
money market, the Bank Board decision of December 16, to cut the key rate from 2.75 percent
to 2.5 percent, has caused the interbank rate to decline by 21 basis points between the fourth
quarter and the first two months of 2015 to 2.51 percent on average. Concerning lending rates,
they stabilized at 6.03 percent during the fourth quarter, covering decreases by 59 basis points in
equipment loans and 20 basis points in consumer loans and an increase by 11 basis points in cash
advances and real estate loans.
8. On the property market, the Real Estate Price Index fell by 1.4 percent in the fourth quarter,
after a year-on-year decrease of 0.6 percent on average during the first three quarters of 2014.
This development mainly reflects decreases by 1.9 percent in residential property and 2.7 percent
in commercial real estate.
9. Under these circumstances, inflation accelerated to 1.5 percent on average in the first two
months of the year, after reaching 0.4 percent in 2014. Core inflation, which reflects the
underlying trend of prices, moved from 1.2 percent to 1.3 percent. The downward trend in
industrial producer prices, which started in January 2013, has intensified in recent months, as they
fell by 6.4 percent in January 2015 as against an average of 2.9 percent in 2014
10. In light of these data and taking into consideration the minimum wage increase of July 2014
and the one expected in July 2015 as well as the review of the water and electricity pricing system,
notwithstanding any potential element with a possible negative impact, inflation would remain
subdued, with balanced risks. It is expected at 1.4 percent on average in 2015 and at the end of
the forecast horizon, i.e. the second quarter of 2016.
11. Considering this inflation forecast and the expected improvement in economic activity and
bank lending, the Board decided to keep unchanged the key rate at 2.5 percent, while keeping a
close eye on all these developments.
12. The Board then examined and approved the Bank accounts, the management report and the
allocation of profits for fiscal 2014, after seeking the opinion of the Audit Committee.
13. The Board also reviewed and approved the currency program for 2015."
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