"Based on all these assessments, the Board considered that the monetary policy stance remains very accommodative, thereby ensuring adequate financing conditions. More specifically, the Board deemed that the current level of the policy rate remains appropriate and decided to keep it unchanged at 1.5 percent," BAM explained in a press release.

During this meeting, the Board analyzed the evolution of the national and international economic and social situation as well as the macroeconomic forecasts of the Bank over the medium term. These forecasts reflect a moderate revival of optimism, particularly prompted by the smooth progress of the anti-Covid-19 vaccination campaign and the favorable climatic conditions prevailing in the current crop year.

Thus, the national economy would grow by 5.3 percent in 2021. The growth rate would consolidate to 3.2 percent in 2022, according to BAM forecasts.

"The value-added of non-agricultural activities would increase by 3.5 percent in 2021 and, assuming a projected cereal production of around 95 million quintals, the value-added of the agricultural sector would rebound by 17.6 percent, thus bringing the growth of the national economy to 5.3 percent," the Central Bank explained.

Economic activity is projected to continue recovering, supported by the 120 billion dirhams recovery plan, the accommodative monetary policy stance, and a relative renewal of confidence in view of the progress made in the vaccination campaign and of the favorable weather conditions prevailing during this crop year.

However, these prospects are surrounded by considerable uncertainty, mainly with regard to the evolution of the pandemic and to the availability of vaccines, both nationally and internationally.

Domestically, the latest data of national accounts for the third quarter of 2020 suggest a resumption of activity after its strong drop the previous quarter. Considering these observations and the available high-frequency indicators, contraction of the national economy over the year as a whole would have reached, according to Bank Al-Maghrib's forecasts, 7 percent, reflecting a decline by 8.1 percent in agricultural value-added and by 6.7 percent in non-agricultural one.

With regard to the labor market, HCP data point to a sharp deterioration in 2020, due to the loss of 432,000 jobs, including 273,000 in agriculture and 107,000 in services. The participation rate fell from 45.8 percent to 44.8 percent and the unemployment rate increased to 11.9 percent overall and 15.8 percent in urban areas.

As a result of disinflationary pressures stemming from demand, inflation remained low in 2020. With the upturn inactivity and the rise in international prices of oil and some food products, inflation is projected to rise, albeit moderately, from 0.7 percent in 2020 to 0.9 percent in 2021 and 1.2 percent in 2022.

In terms of the external accounts, 2020 witnessed a significant decline in trade, with a steeper fall in imports compared to exports. The coverage ratio thus improved by 4.5 points to 62.4 percent and the deficit in the goods trade balance narrowed by 47.8 billion dirhams to 158.7 billion MAD.

On the other hand, the surplus in the balance of services narrowed by 27.6 billion to 60.7 billion dirhams, reflecting a 53.8 percent drop in travel receipts to 36.4 billion dirhams, while transfers from Moroccans living abroad showed strong resilience and increased by 5 percent to 68 billions. Under these conditions, the current account deficit would have narrowed to 1.8 percent of GDP.

Over the forecast horizon, imports are expected to grow at a sustained pace, mainly due to the expected increases in the energy bill and in the purchase of consumer goods, while exports recovery would particularly be fostered by the announced increase of production capacity in the automobile industry.

While transfers from Moroccans living abroad showed strong resilience and increased by 5 percent to 68 billion, remittances from Moroccan expatriates would stand at 71.9 billion dirhams in 2021 then 73.4 billion dirhams in 2022, respectively. Regarding financial operations, FDI receipts are expected to reach around 3.2 percent of GDP, after having dropped to 2.4 percent in 2020.

Meanwhile, despite the sharp contraction in economic activity and the increase of non-performing loans, loans to the non-financial sector rose by 3.9 percent, boosted by the support and stimulus measures put in place

With respect to public finances, budget implementation carried out under the corrective Finance law revealed a deficit, excluding privatization, of 82.4 billion dirhams or 7.6 percent of GDP, taking account of the positive balance, of 5.3 billion dirhams, generated by the Covid-19 pandemic management fund.

Based on the data of the 2021 Finance Law and on the economic growth outlook, fiscal consolidation is expected to resume gradually, as for the deficit, excluding privatization, is projected, according to Bank Al-Maghrib, to narrow to 7.2 percent of GDP in 2021 and then to 6.7 percent of GDP in 2022.

Under these conditions, the Treasury debt ratio would continue to rise, going from 77.4 percent of GDP in 2020 to 79 percent in 2021 and 81.3 percent in 2022, the BAM concluded.