Moody’s Ratings has affirmed Morocco’s Ba1 long-term issuer and senior unsecured debt ratings, in its latest report published on Friday. The outlook remains stable for the country.
The affirmation reflects Morocco’s institutional strengths and its robust external position. However, the nation faces low income levels and socio-economic challenges. Such constraints have made fiscal consolidation efforts difficult for the Moroccan government as authorities struggle to balance social demands with investment needs.
As spending pressures from social security reforms and infrastructure projects pose challenges, Moody’s predicts the government will maintain a stable debt burden.
Morocco’s country ceilings remain unchanged, with a local currency ceiling at Baa1. This is three notches above the sovereign rating.
The foreign currency ceiling stands at Baa2, reflecting modest transfer and convertibility risks. These risks are consistent with the country’s fixed exchange rate system.
Morocco’s robust governance and institutional framework contribute to its resilience. The country has shown effective crisis management during external shocks, according to the report.
Morocco’s Central Bank Bank Al-Maghrib’s track record in maintaining price stability strengthens monetary policy credibility. This controlled approach is aiding in foreign-exchange rate liberalization.
The country’s fiscal policies balance discipline with social and external pressures as the government implements reforms aimed at improving health, education, and public sector governance.
Moody’s forecast has government debt remaining stable at around 65% of GDP.
The government’s medium-term fiscal strategy accommodates higher healthcare and social security spending, estimated at 2.3% of GDP for 2024.
Public-private partnerships are being considered to ease fiscal impacts. Infrastructure projects for major events and climate-related investments are included.
Morocco’s primary deficit is projected to stabilize at about 2% of GDP. This reflects a favorable macroeconomic backdrop and growing pressures on spending.
Challenges remain, however, including low income levels and socio-economic disparities, issues that hinder sustainable growth and job creation opportunities.
Morocco’s income level stood at USD 10,460 in PPP terms in 2023. This figure is significantly below the Ba1 median of USD 27,316.
High rates of employment in the informal economy and youth unemployment hinder the labor market. Participation of women in the workforce remains alarmingly low, according to the report.
Despite structural reforms, progress in addressing these challenges is incremental.
Morocco is working on economic diversification and investments in renewable energy.
The stable outlook reflects balanced risks around the baseline scenario. There are concerns about the pace of economic reforms and spending pressures.
Risks could emerge from limited economic liberalization and state-dominated oligopolies. These factors may hinder inclusive and higher growth in the future, according to Moody’s.
Conversely, successful reforms could lead to quicker credit improvements which would enhance fiscal consolidation and accelerate economic growth.
Environmental risks are also significant in Morocco, impacting its credit profile. The country faces high physical climate risks, including water scarcity.
Social risks include rigid labor markets and limited employment opportunities. Morocco also is underperforming in education, exacerbating socio-economic disparities.
The government’s governance strength is a mitigating factor. However, high debt levels limit financial capacity to address environmental and social risks.
Moody’s ratings reaffirmation reflects no significant changes.
Factors that could influence future ratings include economic reforms which would need to address income levels and job creation effectively.
On the other hand, a rise in government debt burden could exert downward credit pressure. This may result from unforeseen shocks or ambitious spending demands.
Nevertheless, Moody’s stable outlook indicates expectations for continued economic and social reforms which should enhance the economy’s resilience to economic shocks.
The principal methodology used for this rating was published in November 2022. Moody’s provides details on its methodologies on its website.