Morocco Retains BB+ Credit Rating as Fitch Cites Economic Resilience

Morocco’s "BB+" ratings reflect a track record of sound macroeconomic policies and an institutional framework that has supported resilience to shocks, a favorable debt composition including a moderate share of foreign currency debt in central government debt, public creditor support, and a comfortable external liquidity buffer, Fitch notes in a note published on Friday, noting however that these ratings are constrained by weak development and governance indicators, high public debt and a larger fiscal deficit than peers, as well as volatility in agricultural production.

The American agency also noted that economic growth slowed in 2022 to 1.2% from 7.9% in 2021. However, a rebound is expected this year with GDP growth of 3% in 2023, driven by better agricultural production, as agricultural production contracted by 15% due to a severe drought. Forecasting 3.2% growth, driven by industrial sectors, Fitch Ratings explains that downside risks stem from high inflation, tighter monetary policy, slowdown in major trading partners and weather conditions. However, the implementation of key structural reforms will support investment and economic growth, the agency said.

Regarding inflation, it forecasts a drop to 5% in 2023, due to rising interest rates, falling global commodity prices and easing supply shortages, and indicates that inflation will fall to 3.7%, even if it will be above the medium-term average.