Morocco’s central bank maintained its benchmark interest rate unchanged at 2.5%, underscoring the subdued medium-term CPI inflation outlook at 1.8% in 2015 and an average of 1.5% price growth over the next six quarters. The c-bank also noted the improving external position amid narrowing CA gap on smaller trade deficit due to falling imports and rising exports. The c-bank also expects improvement in economic activity and bank lending.

The central bank remains upbeat on the 2015 GDP outlook despite cutting this year’s economic growth projection to 4.6% from the previous 5.0%. The 2015 GDP growth will, however, accelerate from last year’s 2.4%.  Growth will be supported by strong agriculture output that will mitigate the still subdued non-agro growth at 3.3% in 2015. In 2016, Morocco’s GDP growth will brake to 2.4% on cooling agriculture output, according to the central bank.

The central bank was also upbeat on the external sector amid narrowing trade deficit (down 20.4% y/y at end-August) on rising exports and dropping imports. The favourable trade balance parameters coupled with revenues from grants of GCC countries (MAD6bn) and assuming an average oil price of $57 a barrel, will cut current account (CA) deficit to about 2.8% of GDP in 2015, from 5.9% in 2015, the central bank forecasts.

Such positive indicators, coupled with a 23% annual hike in net FDI to MAD 24.2bn at end-August will also help lift FX reserves. The latter totalled MAD210bn at end-August covering around 6 months of imports, the central bank said.