EXECUTIVE SUMMARY
The national economy is now facing an unprecedented situation marked by a double shock of supply and demand. This is due to the lockdown measures adopted both in Morocco and in most of its trading partners. In response to this challenging context, Bank Al-Maghrib has started a new era of monetary policy since mid-March 2020. This one turns out to be more accommodating, thus derogating from the conventional guideline of this institution.
At the end of its 3rd monetary policy meeting in 2020, the central bank kept its key rate unchanged at 1.5%. Upon our analysis, we come out with 5 key points :
- The status quo regarding BAM's key rate was clearly anticipated by local institutions through our August 2020 survey (see AGR Key Rate survey). A decision which appears to be perfectly in line with the monetary policies of Central Banks at the international level ;
- The absence of inflationary pressures by 2021 gives BAM comfortable leeway to further ease its monetary policy within the coming months, in case the economic situation requires it ;
- The observed drop in the economy financing costs is a positive signal for the transmission of monetary decisions to the real economy. This is reflected through the good dynamics of loans to the economy, which grew by 5.1% in July 2020. Nevertheless, we are witnessing a deterioration in the cost of risk in the banking sector within an increasingly challenging economic context ;
- Unlike many countries, printing money is not a very credible scenario for Morocco. As a matter of fact, the resort to longer-term non-conventional monetary instruments, such as long-term repurchase agreements and guaranteed loans, is likely to alleviate the growing pressures on the Moroccan financial system liquidity ;
- For the first time since the start of this health crisis, we notice a consensus among the main
local institutions regarding the Moroccan GDP forecasts. There is a consensus around a -6.1% in 2020 followed by a recovery slightly above +4.0% from 2021.
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