African Development Bank expects Morocco’s economy to grow by 3.3% as it recovers from drought

African Development Bank expects Morocco’s economy to grow by 3.3% as it recovers from drought

The African Development Bank has released its projections for Morocco’s economy, forecasting a growth rate of approximately 3.3 percent for the current year.

This positive outlook comes as the country aims to bounce back from the challenges posed by the dry season experienced in the previous year. Looking ahead, the bank anticipates a further increase in growth to reach 3.5 percent in the following year.

The government’s aspirations align closely with the bank’s projections, with their target set at achieving a growth rate of 3.4 percent. It’s worth noting that this target falls slightly below the 4 percent assumption made in the 2023 Finance Law.

Inflation has been a key concern for the North African region, and the bank’s economic forecasts indicate that Morocco’s inflation rate is expected to reach 5.4 percent this year. However, the situation is expected to improve in the coming year, with inflation declining to 3.6 percent.

The recent increase in inflation can be attributed to global price repercussions resulting from the Russian-Ukrainian crisis, with Morocco experiencing a significant inflation rate of 6.6 percent in the past. This is in contrast to the much lower rates seen in 2021 (1.4 percent) and the average from 2014 to 2020 (0.9 percent).

Despite this recent spike, Morocco has historically maintained relatively low levels of inflation compared to other countries in the North African region. However, the unexpected rise last year prompted the country’s central bank, Bank Al-Maghrib, to adopt a cautious approach toward interest rates.

Addressing the budget deficit is another important aspect of Morocco’s economic landscape. Current projections indicate that the deficit is expected to be around 4.6 percent by the end of this year. However, with the implementation of tax reforms, expansion of the tax base, and improvements in tax administration, the deficit is predicted to decrease to 3.9 percent in the following year, bolstering revenue generation.

Zooming out to the entire North African region, the African Development Bank envisions a growth rate of 4.6 percent in 2023, with a slightly lower growth rate of 4.4 percent expected in 2024.

The services sector, particularly trade and tourism, is projected to be the primary driver of growth in the region. Despite moderate growth of 4.1 percent in 2022, the region experienced a notable growth rate of 5.4 percent in 2021.

It is important to note that growth disparities exist among countries in the region. To address this, the bank emphasizes the need for comprehensive growth achieved through structural reforms. These reforms should prioritize the development of the private sector, enhancing productivity, and fostering job opportunities to strengthen economic stability and prosperity.

Inflation in the region has been a concern, with expectations of a double-digit rate of 14.2 percent in 2023. However, there is hope for improvement, as inflation is predicted to return to 6.9 percent in 2024. Efforts to coordinate monetary and fiscal policies are emphasized to combat rising inflation and protect small businesses and individuals through targeted public expenditures.

Additionally, the African Development Bank’s report highlights the critical importance of food security in the region. Investment in agriculture, including the development of improved agricultural practices, water, and soil management strategies, is deemed crucial. The region must also enhance its resilience, particularly in relation to the “energy transition-water management-food security” nexus.

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