Morocco’s central bank, Bank Al-Maghrib, kept its benchmark interest rate unchanged at 2.25% on Tuesday, signalling continued accommodative policy even as it upgraded its 2026 economic growth projection to 5.6%, the strongest expansion in years, driven almost entirely by an exceptional agricultural rebound.
The decision, the fourth consecutive hold, reflects robust non-agricultural momentum, stubbornly low inflation, and the results of internal stress tests, according to the bank’s quarterly board statement. Cumulative easing since mid-2024 has already lowered commercial lending rates by 61 basis points, keeping borrowing costs supportive for businesses and infrastructure investment.
Growth outlook: agriculture-led surge, then normalisation
Bank Al-Maghrib now expects GDP to expand 5.6% in 2026, up from its prior 2025 estimate of 4.8% and a significant upward revision from earlier projections. The driver is clear: agricultural value added is forecast to surge 14.4% this year after favourable rains ended a seven-year drought, delivering a cereals harvest of 8.2 million tonnes (82 million quintals). Non-agricultural sectors, meanwhile, are projected to grow steadily at around 4.5%, underpinned by ongoing infrastructure spending and private investment.
The outlook moderates sharply to 3.5% in 2027, assuming a return to average harvests and a 5.3% contraction in agricultural output. For investors and corporates, this underscores the economy’s lingering dependence on weather — a classic emerging-market volatility factor even as structural reforms bolster the more resilient non-agri base.
Sectors tied to phosphates, tourism, and manufacturing stand to benefit most from sustained low rates and steady credit growth (projected to accelerate to 6% in 2026).
Inflation remains benign, but watch oil
Headline inflation is forecast to hold steady at just 0.8% year-on-year in 2026, well below the bank’s implicit 2% comfort zone before edging to 1.4% in 2027. Recent mild deflation (prices fell 0.8% y/y in January) has been supported by abundant food supplies and lower fuel costs. Core inflation expectations among financial experts have also drifted lower.
The benign outlook gives policymakers room to keep policy loose. However, the bank explicitly flags upside risks: oil prices are assumed to rise in its baseline scenario, and any prolongation of the Middle East conflict could amplify imported inflation through energy channels.
External balances under pressure from geopolitics
The current-account deficit is projected to widen to 3.1% of GDP in 2026 (from 2.3% in 2025) before narrowing to 2.5% in 2027, primarily on higher energy imports. Offsetting positives include rising phosphate and fertiliser exports, stronger remittances, tourism recovery, and FDI inflows equivalent to 3.5% of GDP.
The bank’s baseline assumes the Middle East war, which has already pushed up global energy prices and prompted references to developments “in Iran” in its surveys, remains short-lived, keeping the impact “relatively contained.”
A prolonged or intensified conflict, however, “could be more pronounced,” particularly via external accounts and commodity prices. This is the key watchpoint for global investors: Morocco’s energy-import dependence leaves it exposed to Strait of Hormuz-style disruptions, even if direct mentions are absent from the statement.
Foreign-exchange reserves are nevertheless on track to reach MAD 482.1 billion ($51.5 billion) by 2027, covering nearly 5.5–6 months of imports, a comfortable buffer that should reassure bondholders and FX traders.
Investor takeaways
- Positive for domestic credit and equity: Steady 2.25% policy rate and accelerating bank credit should support capex in infrastructure, manufacturing, and agri-processing. Moroccan corporate borrowers and listed firms in non-agri sectors gain breathing room.
- Agriculture windfall is real but temporary: The 8.2 million-tonne harvest offers a one-off GDP boost; 2027’s projected slowdown to 3.5% is the “normalised” run-rate investors should benchmark against.
- Geopolitical premium: The 3.1% current-account deficit and energy-cost warnings embed a risk premium. Prolonged Gulf tensions could widen the gap further, pressure the dirham (projected 3.7% real depreciation in 2026), or force a policy rethink.
- Resilience intact: Fiscal deficit continues shrinking (to 3.5% of GDP in 2026), reserves are strong, and non-agri growth remains solid at 4.5%. For Africa- or MENA-focused portfolios, Morocco retains its appeal as one of the region’s more predictable reformers.
Bank Al-Maghrib Governor Abdellatif Jouahri and the board emphasised data-dependence: “The Board will continue to closely monitor domestic and external conditions, particularly developments in the Middle East.” Markets will now watch oil trajectories and any escalation signals from the Gulf for clues on whether today’s optimistic numbers hold or require downward revision.
