Morocco's Central Bank Reduces its Key Rate by 50 Basis Points to 1.5%
Rabat - Bank Al-Maghrib-BAM (Morocco's Central Bank) has decided to reduce the key rate by 50 basis points to 1.5%, at the end of its second session of the year 2020 held on Tuesday in Rabat.
"The Board of Bank Al-Maghrib decided to reduce the key rate by a further 50 basis points to 1.5 percent and to fully liberate the reserve account in favour of the banks," said the Bank in a statement, noting that its macroeconomic projections remain surrounded by an exceptionally high degree of uncertainty.
In the same vein, Bank Al-Maghrib has put in place specific measures to refinance bank credit to participatory banks and microcredit associations.
These new decisions, combined with the various easing measures already implemented, should help, along with those taken by the Government, to mitigate the impact of the pandemic and support economic and employment recovery, the same source added.
The Board noted that, after averaging 1.4 percent in the first quarter of 2020, inflation, measured by the change in the new consumer price index introduced by the HCP last May, with 2017 as the base year, fell to 0.9 percent in April, mainly due to the lower prices of fuels and lubricants.
In the medium term, and against a background of low inflationary pressure from demand and low commodity prices, Bank Al-Maghrib forecasts inflation to remain at a moderate level of around 1percent in both 2020 and 2021.
Its core component, measuring the underlying price trend, is expected to rise from 0.5 percent to 0.8 percent in 2020 and fall back to 0.7 percent in 2021, the Bank estimated.
At the national level, due to the combined effect of drought and the restrictions adopted to limit the spread of Covid-19, the economy would, according to Bank Al-Maghrib's forecasts, witness a 5.2 percent contraction in 2020, its strongest since 1996.
Agricultural value added would decline by 4.6 percent, with a cereal harvest estimated by the Department of Agriculture at 30 million quintals. As for non-agricultural 3 activities, their value added would decrease by 5.3 percent.
According to the Central Bank, in 2021, growth is expected to rebound to 4.2 percent, with a 12.4 percent-higher agricultural value added, assuming a cereal production of 75 million quintals, and an improvement in the pace of non-agricultural activities to 3.1 percent.
In view of the rapid and uncertain evolution of the situation, these forecasts remain surrounded by significant uncertainties, with a balance of risks trending downwards. Indeed, according to the scenarios of a slower recovery of the activity or the persistence of the weak foreign demand and disruptions to supply chains, the recession would be much deeper, the same source added.
In the labour market, the Bank went on, the latest data of the national employment survey were collected by the HCP between 1 January and 20 March revealed that 77 thousand jobs were created, as against a 2-thousand loss in the same period a year earlier, the participation rate improved from 45.7 percent to 46 percent and unemployment rate rose from 9.1 percent to 10.5 percent.
However, a one-time survey carried out by the HCP from 1 to 3 April to capture the impact of the pandemic on employment has revealed the loss of around 726 thousand jobs, i.e. 20 percent of the labour force of organized companies.
In terms of external accounts, provisional data for April reveal first symptoms of the health crisis impact, with a drop by 19.7 percent in exports, 12.6 percent in imports, 12.8 percent in travel receipts and 10.1 percent in transfers of Moroccan expatriates.
According to the Board, the second half of the year is expected to witness a relative improvement with the gradual lifting of restrictions at the domestic level and among trading partners as well as with the stimulus measures, which would, nonetheless, allow only a partial catch-up.
With regard to monetary conditions, lending rates fell by 4 basis points to 4.87 percent in the first quarter of 2020, driven by the dropping rates in loans to private businesses.
Regarding public finances, budget execution at the end of the first five months shows a deficit of 25.5 billion dirhams, as against 19.5 billion dirhams a year earlier, taking into account the positive balance of 18.1 billion dirhams in the new pandemic management special trust account.
In view of the huge uncertainties surrounding the development of the economic situation both at the domestic and international levels, Bank Al-Maghrib will closely monitor the situation, regularly update its projections and identify probable development scenarios.
If circumstances so require, it will call for an extraordinary meeting of its Board before the meeting scheduled on 22 September.
"The Board of Bank Al-Maghrib decided to reduce the key rate by a further 50 basis points to 1.5 percent and to fully liberate the reserve account in favour of the banks," said the Bank in a statement, noting that its macroeconomic projections remain surrounded by an exceptionally high degree of uncertainty.
In the same vein, Bank Al-Maghrib has put in place specific measures to refinance bank credit to participatory banks and microcredit associations.
These new decisions, combined with the various easing measures already implemented, should help, along with those taken by the Government, to mitigate the impact of the pandemic and support economic and employment recovery, the same source added.
The Board noted that, after averaging 1.4 percent in the first quarter of 2020, inflation, measured by the change in the new consumer price index introduced by the HCP last May, with 2017 as the base year, fell to 0.9 percent in April, mainly due to the lower prices of fuels and lubricants.
In the medium term, and against a background of low inflationary pressure from demand and low commodity prices, Bank Al-Maghrib forecasts inflation to remain at a moderate level of around 1percent in both 2020 and 2021.
Its core component, measuring the underlying price trend, is expected to rise from 0.5 percent to 0.8 percent in 2020 and fall back to 0.7 percent in 2021, the Bank estimated.
At the national level, due to the combined effect of drought and the restrictions adopted to limit the spread of Covid-19, the economy would, according to Bank Al-Maghrib's forecasts, witness a 5.2 percent contraction in 2020, its strongest since 1996.
Agricultural value added would decline by 4.6 percent, with a cereal harvest estimated by the Department of Agriculture at 30 million quintals. As for non-agricultural 3 activities, their value added would decrease by 5.3 percent.
According to the Central Bank, in 2021, growth is expected to rebound to 4.2 percent, with a 12.4 percent-higher agricultural value added, assuming a cereal production of 75 million quintals, and an improvement in the pace of non-agricultural activities to 3.1 percent.
In view of the rapid and uncertain evolution of the situation, these forecasts remain surrounded by significant uncertainties, with a balance of risks trending downwards. Indeed, according to the scenarios of a slower recovery of the activity or the persistence of the weak foreign demand and disruptions to supply chains, the recession would be much deeper, the same source added.
In the labour market, the Bank went on, the latest data of the national employment survey were collected by the HCP between 1 January and 20 March revealed that 77 thousand jobs were created, as against a 2-thousand loss in the same period a year earlier, the participation rate improved from 45.7 percent to 46 percent and unemployment rate rose from 9.1 percent to 10.5 percent.
However, a one-time survey carried out by the HCP from 1 to 3 April to capture the impact of the pandemic on employment has revealed the loss of around 726 thousand jobs, i.e. 20 percent of the labour force of organized companies.
In terms of external accounts, provisional data for April reveal first symptoms of the health crisis impact, with a drop by 19.7 percent in exports, 12.6 percent in imports, 12.8 percent in travel receipts and 10.1 percent in transfers of Moroccan expatriates.
According to the Board, the second half of the year is expected to witness a relative improvement with the gradual lifting of restrictions at the domestic level and among trading partners as well as with the stimulus measures, which would, nonetheless, allow only a partial catch-up.
With regard to monetary conditions, lending rates fell by 4 basis points to 4.87 percent in the first quarter of 2020, driven by the dropping rates in loans to private businesses.
Regarding public finances, budget execution at the end of the first five months shows a deficit of 25.5 billion dirhams, as against 19.5 billion dirhams a year earlier, taking into account the positive balance of 18.1 billion dirhams in the new pandemic management special trust account.
In view of the huge uncertainties surrounding the development of the economic situation both at the domestic and international levels, Bank Al-Maghrib will closely monitor the situation, regularly update its projections and identify probable development scenarios.
If circumstances so require, it will call for an extraordinary meeting of its Board before the meeting scheduled on 22 September.
Source : https://www.marocafrik.com/english/Morocco-s-Centr...