Morocco keeps benchmark interest rate unchanged at 2.25% – central bank

Rabat (Reuters) – Morocco’s central bank maintained its key interest rate unchanged at 2.25%, saying current borrowing costs were in line with inflation, growth and the public finances medium-term forecasts.

A general view of the Central Bank of Morocco in Rabat, Morocco, September 24, 2019. REUTERS/Youssef Boudlal

The Bank said however that it will implement measures to support entrepreneurs after King Mohammed VI called in a speech in October on banks to ease access to loans for small medium-sized businesses.

The Bank has kept a freeze on its benchmark interest rate since March 2016.

Inflation, affected mainly by food prices, would drop to 0.3% in 2019 after 1.9% in 2018 before picking up to 1.1% in 2020 and 1.4% in 2021, the bank said in a statement after its quarterly board meeting.

Economic growth would slow to 2.6% in 2019 after 3% in 2018 because of lower farm output caused by a lack of rainfall, the bank said.

However, economic growth should increase again to 3.8% in 2020 and to 3.7% in 2021 assuming a crop of 8 million tonnes of cereals and an improvement of non-agricultural production, the bank said.

Services continue to offset jobs shed by the agricultural sector helping keep unemployment rate at 9.4% in 2019, it said.

The current account deficit will ease to 4.6% of gross domestic product in 2019 from 5.5% in 2018 and will continue to shrink to 3.7% in 2020 and 2.9 in 2021 notably on the back of a drop in the energy import bill.

Taking into account donations from Gulf countries estimated at 2 billion dirhams ($208 million) in 2020, the 1 billion euro bond sale by Morocco last November and another international bond that Morocco is expected to sell in 2020, foreign exchange reserves would stand at 240.7 billion dirhams in 2019, 242.7 billion in 2020 and 248.2 billion in 2021, enough to cover five months of imports.

Fiscal deficit, without counting priivatization revenue, would rise to 4.1% in 2019 after 3.7% in 2019 before falling to 3.8% in 2020 and 3.5% in 2021.

Reporting by Ahmed Eljechtimi; Editing by Jon Boyle and Angus MacSwan

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