Morocco’s economic outlook remains unchanged at BB+, reflecting macroeconomic stability and high public debt, according to the latest assessment from FitchRating.
The credit agency noted that the North African country’s BB+ rating echoes its adequate foreign currency reserves, and suitable macroeconomic policies coupled with low inflation.
Morocco’s weak development and governance indicators, high public debt, and exterior trade deficit remain higher than other emerging economies, the report explained.
The Fitch outlook compresses a wide range of criteria including the country’s recovery rate, the state of public finance, and government spending among others.
Regarding post-pandemic recovery, Morocco’s Gross Domestic Production (GDP) rebounded by 7.4% in 2021, following a 6.4% contraction the year before due to the pandemic.
After the strong rebound, growth is set to slow down to 1.1% in 2022 on the backdrop of this year’s severe drought and its compound effect on agriculture.
In addition to record low rainfall, the international environment has further strained Morocco’s economic recovery.
As COVID-19 restrictions ease, Morocco’s tourism is set to revive. Fitch expects Tourism and strong industrial performance will drive the country’s economic recovery by 3% in 2023.
Despite Morocco’s decision to keep interest rates low to support economic recovery, the Ukraine conflict and lingering COVID-induced disruptions pose a significant threat to the country’s growth prospects.
Assessing Morocco’s public finance status, Fitch noted that increased government spending to mitigate the effect of fluctuating commodities prices will further weigh down on government finances.
The country’s subsidies on food and energy commodities likely reach 2.6% of GDP in 2022, compared to 1.1% the year before.
Morocco’s strategy to implement the New Development Model (NMD) will increase government spending. The government plans to spend 4% of GDP on the model’s implementation by 2025.
Fitch projects that NMD spending will remain under the 4% threshold resulting from the slow implementation of the model.