The Central Bank of Morocco decided on Tuesday to raise the interest rate to 2 percent to meet record inflation, which is expected to reach 6.3 percent this year, while confirming its expectations of a slowdown in economic growth to less than 1 percent. Bank Al-Maghrib said in a statement that its board of directors “decided to raise the main interest rate by 50 basis points to 2 percent.”
This decision aims to “avoid unfixing inflation expectations, and to ensure conditions for a rapid return to levels consistent with the goal of price stability.”
Prices in Morocco witnessed a significant increase during the past months due to the repercussions of the Covid-19 pandemic and the war in Ukraine, as well as an exceptional drought that hit the Kingdom this year. The inflation rate has accelerated since the beginning of the year to reach 8 percent in August, to reach 6.3 percent as a total rate for this year, compared to only 1.7 percent last year, according to central bank estimates. While counting on a decline to 2.5 percent next year.
The bank attributed this record level of inflation “mainly to the increase in food and fuel prices”, as well as the increase in the prices of many services.
Inflation is a global phenomenon exacerbated by the Russian war in Ukraine and the disruption of global supply chains following the Covid closures in China, and to combat it, several central banks in the world have taken similar measures.
In addition to inflation, the “unfavorable external environment” also led to a slowdown in economic growth in Morocco this year, and the situation was exacerbated by an exceptional drought that affected the results of the agricultural sector, whose main contribution to economic growth in the Kingdom (regarding 11.7 percent in 2020).
On Tuesday, the Central Bank confirmed its forecasts for a slowdown in growth to only 0.8 percent this year, with the hope that it would rise to 3.6 percent next year if the grain harvest averaged 75 million quintals, which remains linked to the level of rainfall.
The Kingdom recorded an exceptional growth last year of 7.9 percent.
