Business Recorder (blog)
RABAT: Morocco’s central bank on Tuesday cut its benchmark interest rate by 25 basis points, making its first rate move in three years after a sharp drop in agricultural output and the crisis in the euro zone hit economic growth.
Central Bank Governor Abdellatif Jouahri predicted the economy would grow 2 to 3 percent in 2012, far below the government’s 4.2 percent forecast in the budget and last year’s near-5 percent growth performance.
“This is a year of drought for Morocco,” Jouahri told reporters. He predicted a cereals harvest of around 3.8 million tonnes, 55 percent below its level in 2011, and the economic crisis in Europe to continue impacting tourism and exports.
The central bank said in a statement rates were lowered to 3.0 percent from 3.25 percent. The change was the first since March 2009 and the central bank said it had decided to cut the rate due to a “palpable decline in economic activity”.
The North African country’s state-run agricultural research institute told Reuters earlier this month that Morocco’s cereals harvest this year would not reach half of last year’s level. Government officials have also told Reuters that economic growth may be trimmed to as low as 2.5 percent.
The shortage, which could ratchet up cereal import needs, comes at a sensitive time for the $100-billion economy, which relies on agriculture for 14 percent of its output.
The balance of payments deficit rose in 2011 to 6.1 percent of GDP, a level last seen in the 1980s amid slackening growth in the euro zone and an expected surge in food import needs.
Jouahri said the current account deficit should stand at around the same level in 2012 but he was more concerned about the budget deficit which stood at 7 percent of GDP in 2011.
The rise resulted from a multi-billion dollar spending push by the state to avert any spillover from revolts rocking the Arab region, and which included increases in food and energy subsidies and an agreement with trade unions to raise wages.
“The government hopes to lower the budget deficit to 5 percent (of GDP) in 2012 … But to achieve it must take immediate measures to reduce subsidies in 2012.
“The longer we wait … the more unsustainable our (budget) deficit and Morocco’s ratings will become and then we may repeat the scenario of the 1980s,” warned Jouahri, in reference to the implementation in 1982 of a structural adjustment programme for Morocco by the International Monetary Fund and the World Bank.
Jouahri said the government should not subscribe to a capital hike planned by Maroc Telecom.
“It’s not logical since the state has in recent years been reducing its share ownership in the company.
Plus, how can the state find say 3 billion dirhams for this increase,” he said.
Led since December by moderate Islamists of Justice and Development Party (PJD), the government has allocated 48 billion dirhams for subsidies in 2012, of which 16 billion dirhams were arrears in payments, down from 49 billion dirhams in 2011, which amounted to about the same public expenditure for investment.
Najib Boulif, Minister in Charge of General Affairs and Governance, told Reuters the government plans to reform subsidies as of this year but he declined to say when he expects this reform to translate into a reduction of their burden.
Across Morocco, there are regular bouts of protest against poverty, corruption and the perceived failure of the state to help – complaints that sparked the “Arab Spring” uprisings in other North African countries in 2011.
Agriculture employs 40 percent of the 11-million workforce in Morocco, one of the world’s 10 largest cereal importers, which relies heavily on rain due to the predominance of subsistence and rudimentary farming.
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