Morocco’s Credit Rating Downgraded as Pandemic Impacts Economy and Budget Deficit

According to the rating agency, the Supplementary Finance Act is likely to create "the largest budget deficit and GDP contraction in decades following the shock caused by the Covid-19 pandemic" on the Moroccan economy. Indeed, Fitch Ratings has realized that this law is based on the assumptions of a "5% decline in GDP, forecasts a budget deficit of 7.5% of GDP, the highest in at least three decades, and nearly double the initial budget target of 3.8% (excluding privatization revenues) and the 3.9% deficit recorded in 2019".

Furthermore, while for the American agency, "the government’s revised budget forecasts and underlying economic assumptions are broadly realistic", it says it expects "the authorities to strive to prevent further deterioration of the budget balance, in line with their long-standing commitment to prudent policies". However, it expresses concern about the recent emergence of new infection clusters in industrial areas in Morocco. Thus, for Fitch Ratings, this is proof that there is real uncertainty about "the duration and extent of the pandemic and its impact on the economy". Yet, at the current stage, it points out, "three-quarters of the special fund are about to be spent, which represents the risk of further pressure on public finances".