Low inflation and firm economic growth let Morocco hold rates, focus on credit flow

Morocco’s central bank on Tuesday forecast inflation would stabilize at about 1 percent this year, even as the economy accelerates to its fastest growth in half a decade, underscoring the unusual position Rabat occupies at a moment when much of the world is still wrestling with price pressures.

The quarterly board meeting of Bank Al-Maghrib kept the benchmark interest rate unchanged at 2.25 percent and pointed to “stable medium-term expectations” for prices.

 Inflation, which averaged 1.1 percent through the first eight months of 2025, is expected to end the year at 1 percent before edging back up to 1.9 percent in 2026. Core inflation,  which strips out volatile food and fuel, is projected to settle at 1.1 percent this year, down from 2.2 percent in 2024, before returning to 2 percent next year.

Growth, meanwhile, is expected to accelerate to 4.6 percent this year from 3.8 percent in 2024, before moderating slightly to 4.4 percent in 2026. The bank cited a stronger farm harvest, pegged at 41.3 million quintals of cereals this year and potentially 50 million in 2026,  as well as steady 4.5 percent growth in non-agricultural activity powered by infrastructure and large public works.

The twin dynamics of low inflation and firm growth are allowing policymakers to hold borrowing costs steady while focusing on how credit flows through to smaller firms. Since the start of monetary easing in mid-2024, average lending rates to the non-financial sector have dropped by nearly 60 basis points, according to the bank. 

The board stressed that it would “continue to reinforce measures aimed at easing financing conditions, particularly for very small enterprises.”

Beyond price stability, Tuesday’s meeting laid out an upbeat external picture. Exports are expected to rise 6.2 percent this year and nearly 10 percent by 2026, led by autos and phosphate derivatives. 

Car sales alone are projected to hit 187.6 billion dirhams by 2026, up 20 percent. Travel receipts,  a proxy for tourism,  are forecast to climb 11 percent this year and almost 5 percent in 2026, reaching 131.2 billion dirhams.

Remittances from Moroccans abroad, another key source of hard currency, are also slated to increase 4.8 percent next year to 125.5 billion dirhams. 

As a result, the central bank expects the current-account deficit to narrow to 2.3 percent of GDP this year and 2 percent in 2026, while foreign reserves climb to 418 billion dirhams,  enough to cover about five and a half months of imports.

Budget performance has improved as well. Tax revenues lifted ordinary income by 14.5 percent through August, outpacing a 12.6 percent increase in spending. The fiscal deficit is seen narrowing from 3.9 percent of GDP this year to 3.4 percent in 2026.

Still, challenges remain. Liquidity in the banking system, though improving, is projected to stay negative at 115 billion dirhams by year-end and to widen again in 2026 as cash in circulation grows. 

Lending to the non-financial sector is expected to expand by nearly 6 percent annually in 2025 and 2026, more than double the pace of the past two years,  but analysts caution that sustained credit growth depends on easing conditions for small and mid-sized firms.

The global environment also carries risks. Bank Al-Maghrib cited continued uncertainty despite U.S. trade deals, with global growth slowing from 3.2 percent in 2024 to 3 percent in 2025 and 2.6 percent in 2026. 

Brent crude is projected to fall toward $65 a barrel by 2026, but trade tensions and geopolitical shocks could disrupt that path.

 Prices for Morocco’s raw phosphate are expected to drop, though derivatives such as diammonium phosphate are set to climb next year amid Chinese export curbs.