The Board of Directors of Bank Al-Maghrib held its first quarterly meeting today, March 22, for 2022 where they examined the international situation marked by the events related to the war in Ukraine and global economic turbulences.
In light of the conflict, impacts on the economic activities worldwide continue to destabilize financial markets, prices of commodities, and trade. Morocco is also facing difficult climatic conditions due to the severe shortage of rainfall.
The Council noted skepticism surrounding the macroeconomic forecasts prepared by the Bank’s concerned instances, indicating that these anticipations include a significant decline in agricultural value-added. In the meantime, vaccination campaigns and the loosening of sanitary restriction, monetary stimulus, and sectoral support contribute to a relative improvement in non-agricultural activities.
The forecasts also noted relative stability of external balances and public finances, marked by a sharp acceleration in the pace of inflation during this year.
Considering the expected return of inflation to moderate levels in 2023, the Council resolved to maintain the accommodative approach to monetary policy. The board decided to maintain the interest rate unchanged at 1.5 percent.
Given the increase in energy and food prices and inflation increases for the main economic partners, the Council noted that inflation has continued growing since 2021, expecting to amount up to 4.7% in 2022, up from 1.4% in 2021, before falling back to 1.9% in 2023. Its main component is expected to rise from 1.7% to 4.7% before slowing to 2.6%.
Reckoning the harsh climatic conditions, Bank Al-Maghrib anticipates a decline in agricultural activity, recording a cereal production of about 25 million kantars instead of the 103,2 million kantars recorded a year ago.
The value-added is expected to decrease by 19,8%, causing economic growth to fall to 0.7% in 2022 after its recovery to 7.3% in 2021.
Given the international instability of markets, a tangible acceleration in prices of energy sources was marked since the outbreak of the conflict in Ukraine and the imposition of sanctions against Russia.
The price of Brent crude oil has reached 95.8 per barrel on average dollars in February, and these increases in energy and food prices are expected to continue to fuel inflationary pressures.
In this context, the global economy is expected to slow sharply, noticeably in 2022, after the strong growth in 2021.
Regarding monetary policies, the European Central Bank decided on March 10 to maintain the prices of its key interest rates unchanged, indicating that any adjustment to these prices will be gradual.
The board noted that the deficit in the current balance account is expected to enlarge at the domestic level, driven by the sharp rise in commodity prices. The current account is expected to reach 5.5% of GDP in 2022, after 2.6% in 2021, before falling to 3.7% in 2023.
Imports are expected to increase by 14.9% during 2022 due to the increase in the energy bill and purchases of products, and exports are expected to improve by 12.5% in 2022.
Concerning monetary conditions, the real effective exchange rate is expected to fall by 1.3% in 2022 and 2023 due to the low level of domestic inflation compared to trading partners and competitors.
Despite the significant increase in spending on butane gas and wheat clearance, the budget deficit in public finances is expected to stabilize at about 6.3% of GDP in 2022.
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