Fitch Maintains Morocco’s ’BB+’ Credit Rating Amid Economic Challenges

In a statement, Fitch Ratings indicates that these assets are offset by low development and governance indicators, high public debt and larger fiscal and current account deficits than comparable countries. The American agency notes that in 2021, GDP growth rebounded to 7.4%, after contracting by 6.4% in 2020. It expects growth to slow to 1.1% in 2022. A forecast that is explained by the worst drought recorded in decades, resulting in a contraction of agricultural production and an unfavorable international environment.

"Fitch anticipates a recovery to 3% in 2023 (to approach the ’BB’ median projected at 3.5%), reflecting improved rainfall, a recovery in the tourism sector and solid industrial performance. It expects fiscal policy to remain accommodative to support the economic recovery. The spillovers from the conflict in Ukraine and prolonged disruptions to global supply chains represent the main downside risks to our growth outlook," the same source specifies.

The American agency expects that large fiscal deficits and the economic slowdown will lead to an increase in central government (CG) debt in 2022 to 79% of GDP and 81.6% in 2023 against 74.2% in 2021. It also expects that CG debt, which includes social security and debt of the authorities, will increase in 2023 to 73% (BB median 55% of GDP) against 69.8% in 2020. According to Fitch, the debt will be broadly stable from 2023.

Regarding manageable current account (CAD) pressures, the American agency expects the CAD to increase from 2.4% in 2021 to 5.8% of GDP in 2022. "The surge in global food and energy prices and disruptions to wheat imports due to the war in Ukraine will weigh on the trade balance," it explains. In addition, it expects the CAD to decrease to 3.7% in 2023, as commodity prices fall and exports continue to increase with tourism revenues.

Fitch also mentioned the factors that could, individually or collectively, lead to a negative rating action/downgrade. These include public finances, macro, external finances, etc.