Morocco central bank leaves benchmark rate at 2.25 percent

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Morocco’s central bank left its benchmark interest rate unchanged at 2.25 percent on Tuesday, saying current borrowing costs were consistent with medium-term inflation and growth outlook.

The central bank, Bank al-Maghrib, has kept the key rate on hold since March 2016, when it cut it by 25 basis points.

Inflation, mainly affected by food prices, is expected to slow to 0.6 percent in 2019 from 1.9 percent last year, before picking up to 1.2 percent in 2020 as domestic demand improves, the bank said in a statement following its quarterly board meeting.

Economic growth will slow to 2.8 percent in 2019 from 3 percent in 2018, it said, amid a drop in agricultural activity. Morocco expects to produce 6.1 million tons of cereals this year, down 40.7 percent from last year due to a lack of rainfall.

Gross domestic product growth should increase in 2020 to 4 percent the bank said, citing a 6 percent growth in agricultural production.

The current account deficit is expected to narrow to 4.5 percent in 2019 and 3.1 percent in 2020, from 5.5 percent in 2018, the bank said. The gaps should shrink because of cheaper energy imports and a rise in exports with the upcoming opening of a PSA plant in Kenitra, near Rabat.

Sales of the automotive sector accounted for 27.1 percent of Morocco’s exports with 27.7 billion dirhams in the first four months of 2019, up 0.3 percent compared to the same period last year, as the North African country is home to production plants of French carmaker Renault and car part suppliers.

Morocco’s foreign exchange reserves are expected to stand at 239 billion dirhams in 2019 and 234.5 billion in 2020, enough to cover five months of imports. The government plans to issue two international sovereign bonds in 2019 and 2020, each worth 11 billion dirhams ($1.14 billion).

The budget deficit, excluding privatization revenue, is expected to reach 4.1 percent in 2019 from 3.7 percent in 2018, the central bank said.

Privatization revenue would help shrink the budget deficit to 3.3 percent according to the government, which plans to inject 8.87 billion dirhams into the state budget this month from the sale of an 8 percent stake in Maroc Telecom, Morocco’s largest telecom operator.