Agricultural activity slows Morocco's economic growth by 2.4%
Morocco's economic growth is expected to slow to 2.4% in the first quarter of 2024, according to a report by the High Commissioner for Planning (HCP). This is the result of a turbulent geopolitical environment and a global economy suffering from a prolonged drought.
According to the HCP report, Morocco's economy is expected to grow at an annual rate of 2.4% in the first quarter of 2024, down from 3.5% in the same period last year. "The recovery that started in late 2023 will be hampered by the return of the autumn drought," the report notes.
The start of the 2023-2024 crop year was marked by significant delays in initial crop establishment. The rainfall deficit in the first four months of the season was 53% of that of a normal crop year.
Notably, if rainfall returns to a normal season in the first quarter of 2024, agricultural value added could improve by 0.5% annually, HCP said in its report, which states that growth will reach 2.9%, driven by continued activity in the secondary sector excluding agriculture, especially thanks to the chemical industry, transport and the automobile industry.
At the same time, the value added of the manufacturing industry is expected to increase by 9.4% compared to -11.8% in the same period last year and to continue to recover. Although the development of the service industry is gradual, it will continue to make a significant contribution to economic growth. 1.6 points compared to 0.5 points for the secondary sector.
At the same time, domestic demand remains the main driver of growth. "The fall in incomes, which will be strongly felt in rural areas due to bad weather, will have an impact on household spending, but will be mitigated to some extent by the increase in state subsidies," the HCP report notes, estimating that household consumption will decline by 1.2% in the first quarter of 2024.
Morocco's central bank keeps interest rates at 3%
Morocco's central bank expects inflation to fall to 2.6% in 2024, but still above the 2% target. Morocco's central bank, Al-Maghrib (BAM), announced its decision to keep interest rates unchanged at 3%.
The Committee noted that current interest rates are considered reasonable and that inflation is returning to levels consistent with the price stability objective. The Board's assessment was highlighted in a statement by the BAM following the 2023 quarterly meeting, which took place in Rabat.
On the other hand, investment by non-financial firms was expected to decline "due to continued bank funding costs". The HCP's economic assessment also found that international trade had a negative impact on Moroccan economic activity in the third quarter, reducing overall economic growth by 1.8 percentage points.
The decision to leave interest rates unchanged is in line with BAM's strategy of balancing economic growth and reducing inflation, the statement said.
According to Attijari Global Research, Bank Al-Maghrib's decision to keep its benchmark interest rate stable at 3% is in line with the expectations of 96% of investors surveyed. A survey of 35 influential people in Morocco's financial markets accurately predicted the central bank's desire for stability amid economic uncertainty.
BAM's move follows a year of monetary policy tightening to ease inflation concerns.
1 in 3 Moroccan companies expect to grow by 2024
Markets remain cautiously optimistic, with one in five companies saying future growth prospects are shrouded in uncertainty. Some 34% of Moroccan entrepreneurs predict that market conditions will improve in the next three months, according to a monthly survey by Morocco's central bank, Bank Al-Maghrib.
"Despite strong external demand for automotive products and continued growth in exports of phosphate derivatives, growth in the volume of exports of goods and services is expected to slow to 11.4% in the first quarter of 2024, down from 15.5% in the previous quarter. "Due to sluggish service," it reported. "Imports will continue to grow on the back of improving domestic demand and recovering purchases of intermediate goods," it concluded.
A November survey found that industry workers expect production and sales to improve in all sectors except agribusiness. In the agri-food sector, production is expected to decline and sales to stagnate. In addition, a quarter of the companies surveyed expect production to stagnate and almost a third expect sales to stagnate.
Markets remain cautiously optimistic, with one in five companies saying that future growth prospects are shrouded in uncertainty.
