Morocco’s central bank, Bank Al-Maghrib (BAM), announced on Tuesday that it will not pursue a tighter monetary policy and will keep central bank interest rates unchanged at 3%.
Higher interest rates translate into more expensive loans, which in turn discourage investors and individuals from spending. Hiking interest rates is a textbook solution used by central banks around the world to tame inflation.
Inflation in Morocco has shown signs of recovery in recent months, averaging an annual 5% in August, down from 8% a year earlier. BAM said in a statement that the slowdown is expected to continue, with inflation decreasing from 6.6% in 2022 to an average of 6.0% this year and further to 2.6% in 2024.
Experts speculate that the decision was made to accommodate Morocco’s efforts to reconstruct demolished zones that were hardest hit by the devastating September 8 earthquake.
The news comes less than a week after the country committed to a $11.6 billion plan to rebuild earthquake-devastated areas for the benefit of 4.8 million inhabitants.
The earthquake, which struck central Morocco on September 8, affected 2,930 villages and caused total or partial damage to nearly 60,000 homes.
On the outlook of Morocco’s economic growth, BAM announced that after decelerating to 1.3% in 2022, it should gradually improve to 2.9% in 2023 and 3.2% in 2024, estimates excluding the impact of the earthquake.
The improvement in the growth outlook is the result of a 5% increase in agricultural value-added in 2023 and 5.9% in 2024, assuming an average cereal production of 70 million quintals.
Meanwhile, the growth rate of non-agricultural activities is expected to slow to 2.6% in 2023, followed by an acceleration of 3% in 2024.
The Moroccan central bank’s decision to maintain interest rates unchanged was largely predictable. In one survey made earlier this month, 96% of executives in the Moroccan financial sector and beyond said they expected BAM to continue raising interest rates.
