Bank Al-Maghrib's interest cut to boost growth and employment

Moroccan economic experts have welcomed Bank Al-Maghrib’s decision to cut its key interest rate to 2.25%, effective Thursday, citing anticipated positive impacts on job creation and financial support for small and medium-sized enterprises (SMEs), which form the backbone of the national economy.

Economic analysts surveyed by Hespress AR agreed that the 25-basis-point rate cut was expected, considering both domestic and international factors. These include the influence of global central banks and Morocco’s abundant rainfall, which is projected to enhance agricultural output.

Experts predict that the move will stimulate bank lending, benefiting small entrepreneurs and boosting employment in line with government policies aimed at revitalizing economic activity.

Balancing Growth and Stability

Mohamed Adel Icho, an econometrics professor at the University of Beni Mellal, described the central bank’s decision as part of a well-calibrated monetary strategy.

“This move aims to stimulate economic growth while maintaining price stability,” he told Hespress AR, noting that the rate cut reflects global economic conditions, particularly monetary policy shifts by the U.S. Federal Reserve and the European Central Bank.

Icho highlighted the expected impacts on employment, explaining that easier access to credit will enable SMEs to expand operations and hire more workers. He also noted that increased investment in infrastructure, industry, and services—including tourism and retail—will create additional jobs and drive domestic consumption.

SMEs: The Biggest Beneficiaries

According to Icho, SMEs stand to gain the most from the rate cut. Lower borrowing costs will improve their access to financing, facilitating business expansion and innovation.

“This will enhance their competitiveness in both local and international markets,” he explained, adding that improved liquidity will accelerate their growth and contribute to the broader economy.

At a macroeconomic level, Icho expects the policy to spur consumer and business lending, further driving economic expansion. “Lower interest rates will also boost Morocco’s real estate market by increasing household purchasing power, thereby stimulating construction and housing demand,” he added.

Additionally, reduced financing costs will improve the competitiveness of Moroccan businesses, enhancing exports and mitigating external economic shocks.

A Strategic and Timely Move

Zakaria Firano, an economics professor at Mohammed V University in Rabat, echoed these views, calling the decision “strategic and well-timed.” He emphasized the importance of balancing growth stimulation with inflation control, particularly as Morocco navigates economic recovery amid major development projects.

Firano noted that Bank Al-Maghrib’s decision aligns with global monetary trends. “Despite speculation before the meeting, the rate cut was predictable, given the U.S. Federal Reserve and European Central Bank’s similar moves,” he said.

The central bank’s inflation forecast—projected to remain within 2% over the next 18 months—also provided room for a rate reduction.

Firano added that the move is designed to support both public and private sector investments, with favorable economic conditions, strong public finances, and improved growth forecasts driven by agricultural recovery following recent rainfall.

He highlighted Bank Al-Maghrib’s efforts to promote job creation and investment through preferential bank lending rates and incentives for capital markets.

Challenges and Policy Recommendations

Despite the benefits, the rate cut presents challenges, particularly regarding Morocco’s informal economy and purchasing power concerns. Firano stressed the need for complementary policies that support sustainable growth while maintaining inflation control.

“Lower interest rates help maintain the dirham’s competitiveness and attract foreign investment, which is crucial for economic stability,” he noted.

Icho, meanwhile, called for structural reforms to ensure SMEs fully benefit from expanded credit opportunities. “Supporting startups and entrepreneurial initiatives will maximize the policy’s impact on job creation and economic diversification,” he said. He also cautioned against excessive reliance on consumer lending, advocating for investments in productive sectors to sustain long-term growth.

Both economists underscored the importance of parallel initiatives, such as dedicated investment funds for young entrepreneurs, to complement monetary easing. “By fostering innovation and business expansion, these measures will help create a more dynamic and resilient economy,” they concluded.