Fitch Lowers Morocco's Economic Growth Forecast

Fitch lowered Morocco's economic growth forecast for the current year from 3.4% previously to 1.8%, due to accelerating inflation, tightening monetary policy and slowdown in the agricultural sector.

The agency said, in a report, that agricultural production will weigh more on economic growth than was previously expected, as happened in the fourth quarter of last year, when agricultural production shrank by 15.1% due to drought, while the non-agricultural sector slowed down to 2.4%.

The agency's figures indicate that the weakness in the non-farm sector was mainly driven by a combination of inflationary pressures and monetary tightening, which affected consumption and investment.

Modest agricultural production and a sharp slowdown in growth in the eurozone will also affect Morocco's exports, according to Fitch.

The agency indicated that the month of March witnessed a weakness in rainfall, and therefore the economy will be affected, given the country's heavy dependence on fallow agriculture. 

In addition, the increase in input prices and the poor filling of water dams cause a decrease in the cultivated area. According to the agency, Morocco will increase its imports of agricultural and food products during the current year.

Regarding the key interest rate, the agency said that the series of hikes is expected to continue, which will result in a restriction of the growth of borrowing and investment, as it is expected that the rate will reach 4.5% by the end of the year, compared to 4% previously estimated, due to the large increase in the inflation rate with beginning of the year.

“Fitch” raised inflation expectations in Morocco for the current year from 5% to 7.8%, which will further restrict the purchasing power of households, compared to 6.6% as an average last year, the highest level in four decades.