Rabat - Morocco’s central bank, Bank Al-Maghrib (BAM), announced on Tuesday that the benchmark interest rates will remain unchanged at 3%.

In a statement following their quarterly meeting, BAM explains that in light of the current macroeconomic conditions, their Board considers that  “the current key rate at 3% remains appropriate to strengthen the anchoring of inflation expectations and support its return to levels in line with the price stability objective.”

Benchmark interest rates are a standard measure banks and financial institutions use to determine the cost of borrowing money. The rate influences the interest rates that banks offer to consumers and businesses. 

BAM’s decision to hold interest rates unchanged comes at a time when domestic inflation is gradually subsidizing. After peaking in February 2023 at 10.1%, inflation dropped to 3.4% in December, averaging 6.1% in 2023. 

Regarding economic growth, the central bank estimates that GDP growth at the end of 2023 would have averaged 3%, and is expected to slow down to 2.1% in 2024 before accelerating to 4.3% in 2025. 

Adverse weather conditions and slow investments are all expected to contribute to the drop in economic growth. According to the bank, the land available for cultivation fell from 3.7 million hectares last year to 2.5 million hectares due to the persisting drought. 

Cereal production in Morocco, which is crucial to the country’s food security, is projected to regress around 25 million quintals, down from 55.1 million quintals a year earlier. 

Under these conditions, agricultural value added is expected to contract by 6.4% in 2024 before rebounding by 12.8% in 2025, under the assumption of a return to an average cereal harvest of 55 million quintals.  

Meanwhile, non-agricultural activities are set to improve from 2.6 in 2023 to 3% in 2024 and then to 3.5% in 2025. According to BAM, this reflects the expected momentum of investment linked to their various ongoing and planned projects.