Tuesday, September 25, 2018

Morocco maintains rate but lowers inflation forecast

     Morocco's central bank kept is monetary policy rate steady at 2.25 percent and said it expected inflation to continue to decelerate in the second half of the year after rising in the first half and average 2.1 percent for the year, down from its June forecast of 2.4 percent.
     The Bank of Morocco, or Bank Al-Maghrib (BAM), also lowered its forecast for headline inflation in 2019 to 1.2 percent from an earlier forecast of 1.4 percent as the shocks of higher commodity prices and regulated prices dissipate.
     Underlying inflation is following the same trend and is expected to average 1.0 percent this year, down from June's forecast of 1.1 percent, and then 1.2 percent in 2019, down from 1.6 percent.
      In June BAM also lowered its forecast from March.
      In August Morocco's inflation rate eased to 1.2 percent from 2.1 percent in July, continuing to decelerate from the 2017 high of 2.7 percent in April.
      The forecasts for Morocco's economy were largely unchanged, with BAM expecting growth this year to average 3.5 percent, down from 2017's 4.1 percent, and then easing to 3.1 percent in 2019.
     This compares with June's forecast for 2018 growth of 3.6 percent and 3.1 percent for 2019.
      In the first quarter Morocco's economy expanded by an annual 3.5 percent, down from 3.9 percent in the previous quarter.
      Agricultural value added should rise 5.1 percent this year but then decelerate to 1.6 percent next year while non-agricultural activities would continue to recover and grow by 3.3 percent this year and 3.1 percent in 2019, BAM said.
      Including donations from Gulf states of 4.8 billion dirhams this year and 2.1 billion next year, Morocco's current account deficit is expected to widen to 4.0 percent of Gross Domestic Product this year and then ease to 3.7 percent in 2019.
      Foreign exchange reserves are forecast to stabilize around 240.8 billion dirhams by the end of 2018 and the rise to 252.3 billion by the end of 2019, enough for 5 months and 10 days of imports.
      In January last year Morocco introduced a more flexible exchange rate system by widening the dirham's fluctuation band against hard currencies to 2.5 percent on either side from 0.3 percent for a total range of 5.0 percent.
      The dirham is mainly pegged to the euro but last year BAM reduced the euro weight to 60 percent from 80 percent and raised the U.S. dollar weighting to 40 percent from 20 percent.
      After depreciating in April and May, the dirham was steady from June to mid-August but has risen since then. 
      In the first 8 months of the year BAM said the dirham's exchange rate was up 1.9 percent against the euro and down 0.9 percent against the U.S. dollar.
      Today the dirham was trading at 9.35 to the U.S. dollar, unchanged since the start of 2018.



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