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Morocco's central bank left its monetary policy rate steady at 2.25 percent and once again lowered its forecast for inflation and economic growth.
     

The Bank of Morocco, or Bank Al-Maghrib (BAM), said inflation had edged down in the second half of this year after accelerating in the first half, dropping to 1.1 percent in October from 2.5 percent in June due to lower food prices.
     

By year-end inflation is expected to average 2.0 percent for 2018, up from 0.7 percent in 2017, and then average 1.0 percent next year and 1.2 percent in 2020.

Core inflation was forecast to average 1.1 percent this year, 1.0 percent in 2019 and 1.6 percent in 2020.
     

This latest forecast continues the downward revision of inflation expectations for this year and for 2019 seen in June and September.
     

In September BAM forecast headline inflation would average 2.1 percent this year, down from June's forecast of 2.4 percent and the March forecast of 1.8 percent as the shocks of higher commodity prices and regulated prices dissipate.
     

BAM also forecast in September that 2019 headline inflation would average of 1.2 percent, down from June's forecast of 1.4 percent and March's forecast of 1.5 percent.
     

Morocco's economy has been decelerating in the last four quarters and BAM forecast growth this year would average 3.3 percent, down from 4.1 percent in 2017 and September's forecast of 3.5 percent. In June BAM forecast growth this year of 3.6 percent.
     

Next year growth is expected to slow further although non-agricultural activities are expanding.
     

The economy is expected to expand by 3.1 percent in 2019 before picking up speed in 2020 to 3.6 percent growth. In the second quarter gross domestic product grew an annual 2.4 percent, down from 3.2 percent in the first quarter.
     

Assuming an inflow of grants from Gulf states of 4.8 billion dirhams in 2018 and 2.0 billion in 2019, BAM expects Morocco's current account deficit to rise to 4.4 percent of GDP by the end of this year form 3.6 percent in 2017.
     

But a rise in exports, led by the automotive sector and a fall in imports, the deficit is expected to ease to 3.7 percent in 2019 and then 3.2 percent in 2020.
     

The real effective exchange rate of the dirham is expected to remain virtually stable this year and then appreciated by 1.6 percent in 2019 before dropping by 0.8 percent in 2020.
     

Against the euro the dirham has risen steadily since April though it has given back some of its gains in the last few weeks. The dirham was trading at 10.88 to the euro today, up 2.9 percent this year.
     

BAM's forecast for the government deficit for fiscal 2018 was unchanged at 3.7 percent of GDP, 3.8 percent in 2019 and 3.6 percent in 2020.
     

The central bank's policy decision came the day after the International Monetary Fund's board approved a precautionary, 2-year, US$2.97 billion line of credit for Morocco - similar to three previous arrangements - to provide Morocco with insurance against external risks and support the government's plans to reduce fiscal and external vulnerabilities and promote higher and more inclusive economic growth.

 

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