Morocco Economic Forecast

In Q1 2023, the statistical office expects GDP to have grown 3.4% thanks to rains in December boosting agricultural output. Nonetheless, available data is mixed. Although inflation accelerated in Q1 compared to Q4, boding poorly for consumer spending, industrial production rose in Q1 compared to Q4, according to a business survey conducted by the Central Bank. Turning to Q2—the middle of harvest season—the country continues to suffer from a months-long drought. According to the European Commission, the drought means that barley and wheat yields will be nearly 20% lower this year than in the past five years. This poor harvest will severely knock agricultural output and stoke inflation in the quarter. In response, in early May, the government raised spending on its water and irrigation program to USD 14.3 billion, focusing on boosting the supply of drinking water and constructing desalination plants.

Inflation decelerated to 7.8% in April from 8.2% in March. Inflation should continue to ease on average this year as rate hikes kick in and the base effect toughens. The extension of the Russia-Ukraine grain deal until mid-July should provide further relief. Key factors to watch include commodity prices and this year’s harvest.