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As usual, the wali addressed journalists by summarizing the main points of the analysis of the board of Bank Al-Maghrib which led to a 25 basis point reduction in the key ratecontradicting all the analyzes and predictions of research centers and analysts who anticipated a status quo.
Although several questions focused on the drop in the key rate that few analysts had predicted, Abdellatif Jouahri was optimistic about the forecasts for growth, inflation, public finances and all macroeconomic aggregates. According to him, these elements not only motivated, but also imposed such a decision.
“The whole council decided unanimously to lower the key rate, we have specialists with us. In 2024, and so far, we have recorded an inflation level below 2% (1.5%), and we forecast 2.7% in 2025. However, the main component of inflation, i.e. underlying inflation will be 2.3% in 2024 and reached 2.1% in April. The other data is also positive: growth is 3.4% in 2023; it is expected to reach 4.5% in 2024 and 4.8% in 2025, growth rates we have not seen in several years. Concerning public finances, the budget deficit is 4.3% in 2023 and is expected to decrease in the next two years. Likewise, total debt is decreasing, going from 70% to 68% in the next two years, which demonstrates control of public finances and the government’s total debt. The main objective of the framework letter preceding the 2024 finance law from the head of government was the preservation of macroeconomic balances, and they kept their promise. Furthermore, the current account deficit showed 0.6% of GDP in 2023, and is expected to stand at 1.7% in 2024 and 2.7% in 2025. Foreign exchange reserves amount to five months and half. As for investment, we see the major projects in which Morocco is engaged, such as the ports of Nador and Dakhla, the World Cup and desalination projects. So what interests me most is inflation and we are within the target of 2% for the years 2024 and 2025and all aggregates show positive signs. The situation is therefore not that of March. This is what led to the 25 basis point reduction in the key rate. In September we will review and evaluate the data, because uncertainty is still present.”
Butane gas decompensation
The entry into force of the partial decompensation of butane gas, coupled with direct social aid, has raised doubts as to whether the Central Bank will take into account the new gradual prices of gas cylinders in its inflation forecasts, as well as of the money supply relating to social assistance, which could potentially create inflationary pressures.
“Of course, we took into account in our inflation forecasts what was announced by the government, the 10 DH for the month of May and the 10 DH for the start of 2025. Concerning what level they will act on inflation, we have not calculated precisely. This explains the jump we observe between 1.5% in 2024 and 2.7% in 2025. However, underlying inflation, which excludes volatile products, remains at 2.3% over 2024 and 2025. We are therefore in the target from Bank Al-Maghrib. I think that the progressiveness with which the government is proceeding is intelligent, because there was no negative reaction. Decompensation took place at the same time as direct social assistance. So, at the same time as we decompensate, we support the purchasing power of the targeted populations. This cost around 9 billion dirhams and affected more than 3 million beneficiaries. This is a good decision because decompensation will target more the most vulnerable populations, but will also provide budget margins to the government to try to move faster in the investments envisaged in several vital sectors”, explains the wali.
Overdue debts
Bad debts are attracting considerable attention, particularly on the progress of the plan to create a dedicated secondary market.
In response to a question on this subject, the governor said: “Things are progressing, we have practically taken everything into account, and I think you are good luck, because the last meeting to finalize the project is June 27. We have to see how things are going to be done, that is- say the adoption circuit which must be discussed with the General Secretariat of the Government This will take time because there are still things to be resolved. Even if we have understood everyone’s opinions very closely, I know that when. we arrive at the last 100 meters, this is where the points must be reviewed.”
Inflation targeting
Another topic of great importance is the transition to an inflation targeting system, where the Central Bank will focus exclusively on maintaining inflation within a predefined range (usually 2%). For Morocco, this is a major structural change that requires great caution and careful preparations.
“We started all the technical work with the International Monetary Fund, i.e. revising our forecast modelsespecially with the recurrence of geopolitical crises that have been triggered. We are completely revising our forecasting models, we are also examining the aspects of the timing and preparation, as well as all the necessary communication to be established on this subject, because they will not mention targeting alone, but in connection with the evolution of the exchange rate regime. We are in full preparation of everything that is required for targeting to enter into the best conditions of application by the Central Bank”, summarizes the wali in response to a question on the progress of the inflation targeting project.
Elections in Europe, Moroccan banks and MREs
More than 70 countries are on the verge of major course changes, leading to revisions of paradigms and orientations, due to elections planned by the end of the year, particularly in Europe and this is the case In France. These developments require careful monitoring by the Central Bank, particularly with regard to financial transfers from MREs and the activity of Moroccan banks in Europe.
“Yes, we are closely following the upcoming elections and the possible rise of the far right. We will first see how this will be managed, because to govern, you need a majority. Many people are asking questions about this, particularly about the split in the vote in France. We are negotiating with Europe, because after Brexit, Europe reviewed the legislation governing the presence and activity of non-European banks on European soil. Obviously, they did not want England to be able to continue to benefit in some way from the European passport, but this affected us, because when they talk about non-European banks, this affects all foreign banks, including our Moroccan banks. We are holding very close discussions with all stakeholders, in particular the Ministry of Foreign Affairs, the Ministry of Finance and the banks concerned, with the management of the European Commission FISMA, which is responsible for the file and which has developed a project presented in front of the European Parliament. For us, there are aspects that are not very clear in terms of wording. When the Mayor came here, there were discussions between the Moroccan side and the French side on this aspect of the problem. These discussions will continue, regardless of the government in place. They will continue not only at national level, but also at European level, because they themselves have told us that they must question the European Commission on the interpretation of certain provisions. Thus, exchanges will not only take place with governments, but also with the European Commission. For us, it is an issue Very important for our fellow citizens and for nationals. This is an issue that we are following very closely and on which we will defend ourselves in order to safeguard the natural flows of our Moroccans in Europe”, concludes Jouahri.
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