Senior IMF official: Morocco’s economy has performed quite well despite drought

MARRAKECH - Morocco’s economy has performed quite well despite suffering from a severe drought in the last few years, said Tobias Adrian, Financial Counsellor and Director of the Monetary and Capital Markets Department of the International Monetary Fund (IMF) in Marrakech.

“Morocco has had drought. But even with drought we’ve seen agricultural production to be fairly strong and tourism is picking up as well,” said Adrian during the Annual Meetings of the IMF and the World Bank.

“All emerging countries around the world have been hit by rising oil prices in recent months and a number of commodity prices have increased. That’s a headwind for many,” he said.

“I think the central bank is doing a great job in terms of moving monetary policy in a way to get inflation back to target, and is managing the trade-off very well," he added.

Bank Al-Maghrib (BAM) said on September 26 that it will keep interest rates unchanged at 3% and will not pursue a tighter monetary policy.

Inflation in Morocco accelerated to 5% year-on-year in August, from 4.9% a month earlier, according to the statistics agency HCP.

Food prices, the main driver for inflation in Morocco, rose by 10.4% from a year earlier, while non-food inflation increased by 1.3%. On a month-on-month basis, the index rose by 0.3%.

BAM said in a statement that the slowdown of inflation is expected to continue, decreasing from 6.6% in 2022 to an average of 6.0% this year and further to 2.6% in 2024.

Jason Wu, the assistant director overseeing the Global Markets and Analysis division at the IMF, said that the Bank of Maghrib’s monetary policy has been appropriate despite external pressures.

“In recent months as we’ve seen that global interest rates have risen, the dirham has depreciated a little bit and spreads have widened a little bit but at manageable levels partly reflecting the fact that a buffer has been built by these policy actions,” said Wu.

Adrian said that Morocco has done a great job in moving towards more flexibility of the exchange rate.

“In our assessment, allowing the exchange rate to buffer some of the shocks is very important for monetary policy transmission and to cushion against adverse shocks,” he said.

“From the financial stability point of view we do feel that Moroccan authorities are taking very good steps to make sure that the banking system is well capitalised and they have taken many steps to increase financial inclusion, something that is so important for both financial stability and financial growth,” he concluded.