During this meeting, the Board analyzed social and economic developments as well as the Bank's medium-term macroeconomic projections, said the bank in a statement, adding that the latter were adjusted from the June edition based on the available data, the health developments and the authorities' responses.

The resulting central scenario assumes a more pronounced contraction of the economy in 2020, followed by a relative rebound in 2021. However, it remains surrounded by an exceptionally high degree of uncertainty, particularly due to the national and international evolution of the pandemic and its consequences, it noted.

The Board noted that, after its stagnation in the second quarter and its slight year-on-year decline in July, the Consumer Price Index rose by 0.9% in August as a result of higher volatile food prices. Thus, its average increase in the first eight months of the year amounted to 0.7% against a background of weak demand pressures, inflation is expected to continue evolving at low levels, averaging 0.4% in 2020 before speeding up moderately to 1% in 2021, it said.

At the domestic level, the latest available national accounts data concern the first quarter of 2020 and therefore only partially reflect the impact of the pandemic on the economy. These data show a strong deceleration of growth to 0.1% as against 2.8% in the same quarter a year earlier, according to the central bank.

For the whole of 2020, the forecast announced in June was adjusted downwards in view of the slower-than-expected recovery of activity, the implementation of some local or sector-based restrictions following the resurgence of infections, and the continued almost general closure of borders for travelers, said the statement.

Hence, according to the baseline scenario adopted by Bank Al-Maghrib, domestic economy would post a contraction of 6.3%, with declines of 5.3% in agricultural value added and 6.3% in non-agricultural sectors.

In 2021, GDP would rebound by 4.7%, driven by a 12.6% increase in agricultural value added, assuming a cereal harvest of 75 million quintals, and a 3.7% improvement in non-agricultural value added. These projections, which remain surrounded by an exceptionally high degree of uncertainties related in particular to the evolution of the pandemic, the scope of its repercussions and the pace of recovery, will have to be regularly updated, the same source underlined.

On the labor market, the HCP second quarter data indicate a net loss, compared to the same quarter of 2019, of 589 thousand jobs, four fifths of which were in agriculture. In addition, nearly two thirds of the persons who preserved their jobs worked less than usual, and the weekly hourly volume per person fell from 45 to 22 hours, a decline mostly observed in non-agricultural sectors.

At the same time, the number of employed people fell by 93 thousand and the participation rate fell from 45.8% to 44.8%. Under these circumstances, unemployment rate worsened from 8.1 percent to 12.3% overall, from 11.7% to 15.6% in cities and from 3% to 7.2% in rural areas.

Regarding external accounts, exports of goods fell by 17% year-on-year at the end of July, mainly due to the sales decline by 28.7% in the automotive sector and 29.5% in the textile industry. Imports fell by 17.5%, mainly reflecting a drop of purchases by 18.5% in capital goods and 24.8% in finished consumer goods, as well as a 31.6% lower energy bill.

As for travel receipts, they fell by 44.1%, while the decline of Moroccan expatriates' remittances was limited to 3.2%. For 2020 as a whole, exports would, according to Bank Al-Maghrib’s projections, fall by 16.6% before improving by 22.4% in 2021, driven in particular by the expected increase in shipments of the automotive sector. At the same time, imports of goods would contract by 17.4% before increasing by 17% in 2021.

As for travel receipts, they would slump sharply from 78.8 billion in 2019 to 23.9 billion dirhams in 2020 then rebound to 49.1 billion dirhams in 2021. More resilient to the crisis, Moroccan expatriates’ remittances would show a limited decline of 5% to 61.5 billion before improving by 2.4% to 63 billion in 2021.

Against this background, and taking into account grant inflows of 7.2 billion dirhams in 2020 and 2.6 billion in 2021, the current account deficit would widen to 6% of GDP in 2020, as against 10.3% forecasted in June, and ease to 5.2% in 2021.

As to FDI inflows, they would decline to the equivalent of 1.5% of GDP this year, against 2.9% in 2019, before recovering in 2021 to the average level observed before the crisis.

Bearing in mind the exceptional mobilization of external financing, the outstanding amount of official reserves assets would stand at around 294.7 billion dirhams at end of 2020 and 289 billion dirhams at end of 2021, ensuring coverage of around 6 months and 20 days of imports of goods and services.

Concerning monetary conditions, outstanding bank loans to the non-financial sector increased by 6% year-on-year at the end of July, mainly due to the significant surge in cash loans granted to private enterprises. In view of the expected evolution of economic activity and the projected impact of both the Intelaka program and the various support and stimulus measures, outstanding bank credit to the non-financial sector would grow by around 4% in 2020 and in 2021.

As a main result of the 25-basispoints reduction in the key interest rate in March, lending rates fell by 29 basis points to 4.58% on average in the second quarter, benefiting both large enterprises and very small, small, and medium-sized ones. This decline is expected to continue in view of the 50-basispoints cut of the key rate in June and the implementation of guarantee schemes designed to finance the recovery under conditions tied to this rate.

The real effective exchange rate, which increased by 1.1% in 2019, would depreciate by 0.8% in 2020 and 2% in 2021, reflecting a decrease in nominal terms as well as a lower domestic inflation compared to partner countries and trading competitors.

With regard to public finances, budget implementation at the end of the first eight months of the year reveals a deficit of 46.5 billion dirhams, as against 35.2 billion a year earlier, considering the positive balance of 9 billion dirhams recorded in the special fund for the pandemic management.

Current revenues declined by 6.5%, impacted by an 8.4% drop in tax revenues. At the same time, overall expenditure went up by 2.5%, mainly reflecting an 8.3% increase in expenses of «other goods and services», whereas investment expenditures fell by 4.7% and subsidy expenses by 6.4%.

Considering the reduction of the stock of pending operations by 1.6 billion, cash deficit stood at 48.1 billion dirhams, worsening by 3.2 billion dirhams compared to its level at end-August 2019. This need was covered by domestic resources of a net amount of 32.8 billion dirhams and by net external loans of 15.2 billion dirhams.

Taking into account the data of the 2020 Amended Finance Act and the continued mobilization of specific financing in 2021, the budget deficit, excluding privatization, is expected to widen from 4.1% of GDP in 2019 to 7.9% this year, before narrowing to 5.1% in 2021.

In addition to domestic resources, the Treasury needs are covered by an exceptional mobilization of external financing. As a result, debt of the Treasury would increase from 65% of GDP in 2019 to 76.1% in 2020 and 75.9% in 2021.