IMF recommends inflation targeting for Morocco amid strong growth outlook

Tuesday 11 February 2025 - 15:45

By: Dakir Madiha

IMF recommends inflation targeting for Morocco amid strong growth outlook

Morocco's economy is poised for robust growth of 3.9% in 2025, building on its 3.2% expansion in 2024, as the International Monetary Fund advises the nation's central bank to implement an inflation-targeting framework and enhance debt reduction initiatives.

The country has demonstrated remarkable success in controlling inflation, which dropped from 6.1% in 2023 to 0.9% in 2024. In light of this achievement, the IMF's Article IV consultation mission, conducted from January 27 to February 7, recommends that Bank Al-Maghrib maintain its course toward adopting an inflation-targeting framework.

Roberto Cardarelli, who headed the IMF mission, endorsed the current neutral monetary policy stance while emphasizing that future rate adjustments should be guided by economic data. The central bank projects inflation to reach 2.4% in 2025.

Morocco's fiscal performance has shown improvement, with tax reforms yielding better-than-expected revenue and reducing the fiscal deficit to 4.1% of GDP in 2024, surpassing the original 4.3% target set in the 2024 Budget. However, the IMF stressed the importance of further fiscal consolidation, recommending that surplus revenues be directed toward accelerating debt reduction to pre-pandemic levels.

The economic landscape faces certain challenges, particularly in employment, where the unemployment rate increased to 13.3% in 2024 from 13% the previous year. The IMF specifically highlighted the need to address labor displacement from the agricultural sector caused by recurring droughts.

The Fund praised Morocco's progress in operationalizing the Mohammed VI Investment Fund to improve SMEs' access to equity financing. It also supported the ongoing reform of the Organic Budget Law, which aims to establish a new fiscal rule based on a medium-term debt target.

While the IMF assessment indicates that risks to Morocco's economy are "broadly balanced," it acknowledges persistent uncertainty regarding geopolitical tensions and climate conditions. The current account deficit is expected to widen to approximately 3% as growth accelerates, while the non-agricultural sector maintains strong expansion driven by robust domestic demand.