Bank Al-Maghrib (BAM) should continue its restrictive monetary policy in 2023 in order to ensure a return of inflation towards its objective of price stability, according to Attijari Global Research (AGR).
“Like international experience, BAM acts on inflation through the channel of credit distribution by trying to slow down consumption and investment. Taking into account economic projections, BAM should logically continue its restrictive course in 2023 in order to ensure a return of inflation towards its objective of price stability”, underlines AGR in its last research report entitled “BAM: the tightening continues in the face of the persistence of inflation”.
And to clarify that inflationary tensions in Morocco are fueled by a double shock. “On the one hand, the repercussions of the drought, and on the other hand, the rise in international commodity prices, reports MAP.
Indeed, the food component appreciated by more than 20% at the end of February 2023. The latter contributes nearly 1/3 to the basket of the Moroccan consumer”, explains AGR.
In its analysis, published at the end of BAM’s 1st monetary policy meeting in 2023, AGR affirms that the Central Bank remains determined to act against the persistence of inflationary tensions in Morocco, recalling that for the 3rd consecutive time since September 2022 , the institution decided to raise its key rate by 50 basis points (bps) to bring it to 3%, i.e. its highest level since 2014.
“Nevertheless, the level of the current rate is 40 bps below the average observed during the period 2001-2012, i.e. 3.40%. This situation now allows BAM to have some leeway in the conduct of its restrictive monetary policy,” the analysts added.
In addition, AGR underlines that the diffusion of the monetary tightening of BAM towards the real sphere remains contrasted. On the one hand, the cost of Treasury financing factors in the normalization of rates in Morocco with a general increase in the primary curve. On the other hand, lending rates only partially factor in the 100bp increase in the TD in 2022. The latter rose by only 26bp in Q4-2022 to 4.50%. For their part, credits to the economy should show a moderate increase of 4% in 2023.
On the monetary level, the liquidity needs of the banking system should reach a record 87 billion dirhams (MMDH) in 2023, due to the continuous increase in fiduciary circulation, forecasts AGR, noting that this underlying trend is fueled by a long cycle of low remuneration of national savings. Indeed, 6-month and 12-month DATs (term deposits) stand at 2.24% and 2.67% in 2022, up by only 5 bps and 14 bps respectively in one year, the same source reports.
Faced with this need, specifies AGR, the Central Bank continues to keep TMPs in line with the TD through its liquidity injections via 7-day advances and its longer-term instruments, recalling that BAM has made BDT redemptions in Q1-2023 for nearly 16 billion dirhams.