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IMF Commends Morocco for “Very Strong Policy Response” to Negative Shocks of War in Ukraine, Drought

The International Monetary Fund (IMF) commended Morocco for its “very strong policy response” to mitigate the social and economic impact of the recent negative shocks related to the war in Ukraine and the drought.

In a statement issued Tuesday in Washington at the conclusion of its 2022 Article IV Executive Board consultations with Morocco, the IMF projects that Morocco’s GDP growth is projected “to accelerate to 3 percent in 2023, mainly driven by the rebound in agricultural output and its positive spillover effects to the rest of the economy.”

“Inflation is forecast to gradually decline to about 4 percent in 2023,” as the commodity price shock gradually dissipates, and the monetary stance becomes less accommodative.

The current account deficit is projected to narrow towards its norm of around 3 percent of GDP in the medium term, “boosted by structural reforms,” the international financial institution said.

The baseline projections are subject to “unusually high uncertainty,” mostly related to a worsening of global conditions and greater fallout from the war in Ukraine.

In its statement, the IMF notes that despite the increase in current spending due to higher subsidies and other government measures that have mitigated the economic impact of the shocks, the overall budget deficit is expected to fall in 2022, noting in this regard “the strong performance” of both tax and non-tax revenues.

Commending the Moroccan authorities for the “very strong policy response” that has mitigated the social and economic impact of recent negative shocks, the IMF Executive Directors said that while risks to the economic outlook are tilted to the downside, “continued strong policies and a rapid implementation of reforms would support economic activity going forward.”

Referring to the 2023 Finance Law, they noted that the budget ” the 2023 Budget, which strikes a balance between the needs to reduce the deficit, mitigate the social and economic impact of shocks, and finance structural reforms..”

The IMF also hailed the progress made by Morocco in improving its financial supervision and regulatory framework, while highlighting its “strong commitment” to implementing comprehensive structural reforms.

“The reform of the social protection, health, and education systems would improve fairness and quality of access, better target spending, and sustain human capital in the long run,” the statement concluded.


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