Morocco’s central bank is expected to keep its benchmark interest rate at a record low as subdued inflation gives policymakers space to focus on a priority set by the king -- reviving an economy battered by Covid.
Tuesday’s rate decision comes 10 days before a highly anticipated address by King Mohammed VI to the newly elected parliament, in which he’s expected to put economic growth at the top of the national agenda.
The North African nation has overcome the worst of the pandemic’s economic repercussions, rolling out one of the continent’s most advanced vaccination campaigns and disbursing stimulus checks to the neediest firms and households. A pick-up in exports and tourism over the summer has replenished foreign exchange reserves while a record grain harvest had through last month helped contain the impact of a global rise in commodities prices.
Annual inflation eased to 0.8% in August, its lowest level in five months and far below the central bank’s 2% target. That allows the Bank Al-Maghrib to hold its benchmark rate at the historic low of 1.5% that’s been in place since a combined cut of 75 basis points in March and June of last year.
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A survey of 35 influential investors in Morocco’s stock market showed that 95% of respondents expect the central bank to extend the rate pause for a fifth quarterly policy meeting in a row. The survey was conducted by Attijari Global Research, a unit of Morocco’s biggest lender Attijariwafa Bank.
“The Moroccan context seems to have a buffer,” business daily L’Economiste argued in an editorial on Monday, citing “relatively contained core inflation” that will allow the central bank to hold again.
The focus will instead be on whether the new government, due to be unveiled any day following this month’s parliamentary elections, will sustain the stimulus programs introduced during the pandemic, it said.
Pro-business candidates seen as close to the 58-year-old monarch won the polls by a landslide; their immediate priority will be to draft a pro-growth 2022 budget in line with the king’s National Pact for Development.
Prime Minister-designate Aziz Akhannouch said his three-party coalition will work to enact the plan that seeks to address structural economic weaknesses exposed by the pandemic, double the country’s gross domestic product per capita and transform it into an emerging economy by 2030.
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The plan advocates a temporary break from fiscal discipline in order to stimulate economic growth that has fallen from an average 4.8% in the first decade of the century to 3.5% in the nine years to 2019, before a rare contraction in 2020. The drop in growth has coincided with a rise in protests over uneven development and stubbornly high youth unemployment.
“We know that lower interest rates are good for economic growth. We also know that lower fiscal policy is good for economic growth,” Michael Zaoui, a member of the committee tasked by the king with devising the growth strategy, told Bloomberg in a recent interview.
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