Morocco Keeps Interest Rates at 3% to Support Post-Earthquake Reconstruction
Inflation and Monetary Policy
Morocco’s central bank, Bank Al-Maghrib (BAM), announced on Tuesday its decision not to implement a tighter monetary policy, opting to maintain its central bank interest rates at 3%. This choice is significant as higher interest rates can lead to more expensive loans, potentially discouraging both investors and individuals from spending. Traditionally, central banks worldwide employ interest rate hikes as a means to control inflation.
Inflation Trends and Earthquake Reconstruction
In recent months, Morocco has witnessed a gradual reduction in inflation, with an annual average of 5% in August, down from the previous year’s 8%. BAM issued a statement, indicating their anticipation of this deceleration to persist, with inflation projected to decrease from 6.6% in 2022 to an average of 6.0% in 2023 and further to 2.6% in 2024.
Experts speculate that this decision aligns with Morocco’s efforts to rebuild areas severely affected by the devastating September 8 earthquake, which struck central Morocco and impacted nearly 60,000 homes across 2,930 villages. Just last week, the country committed to an $11.6 billion reconstruction plan aimed at benefiting 4.8 million inhabitants in these areas.
Economic Growth Outlook
Looking ahead, BAM provided insights into Morocco’s economic growth outlook. After experiencing a slowdown to 1.3% in 2022, the nation’s economy is expected to gradually recover, with growth estimates of 2.9% in 2023 and 3.2% in 2024, excluding the earthquake’s impact.
The improved growth outlook is attributed to a projected 5% increase in agricultural value-added in 2023 and 5.9% in 2024, contingent upon an average cereal production of 70 million quintals. In contrast, non-agricultural activities are anticipated to experience a growth rate of 2.6% in 2023, followed by an acceleration to 3% in 2024.
While the decision by the Moroccan central bank to maintain unchanged interest rates may have surprised some, it was largely expected by financial sector executives. In a recent survey, 96% of respondents anticipated BAM’s decision to refrain from raising interest rates, reflecting the bank’s current strategy to support post-earthquake reconstruction efforts and stimulate economic growth.
Subscribe to BNN Breaking
Sign up for our daily newsletter covering global breaking news around the world.