Page 11 - DMEA Week 14 2021

DMEA FINANCE & INVESTMENT DMEA

S&P downgrade pushes

Morocco’s credit rating to junk

AFRICA MOROCCO’S credit rating fell from investment induced contraction of 6.7% in 2020 to a strong
grade to junk status as S&P, a ratings agency, 5% growth in 2021 depending on the effects of
downgraded the sovereign’s long- and short- the COVID-19 pandemic in Morocco and its key
term local and foreign currency ratings to BB+/B trading partners, in particular Europe, which
from BBB-/A-3 with a stable outlook. absorbs 70% of the country’s total exports.
The ratings agency’s reasoned that the central S&P is of the view that restoration of eco-
government’s budget deficit widened to 7.7% nomic growth will likely stem from domestic
of GDP in 2020 from 4.1% in 2019 because of demand on the back of private consumption,
the pandemic-related impacts on revenue and business investment activity, goods exports, and
spending and the government’s budgetary meas- a possible recovery in tourism.
ures to alleviate the damage. Furthermore, the ratings agency sees Moroc-
Revenue declined 9.4%, and current spend- co’s fiscal and growth vulnerabilities are partly
ing and public investment increased 3.4% and mitigated by a the current account deficit shrink-
18.8%, respectively, in 2020. Following govern- ing to about 1.8% of GDP in 2020.
ment induced gradual budgetary consolidation Besides a sharp decline in imports and a rela-
measures, it expects the general government tively smaller decline in exports, a strong perfor-
deficit to decline to 4.6% of GDP in 2024. mance of remittances from abroad and increase
As a result of persistent budget deficits over in grants helped to contain the loss of foreign
several years, the net general government debt- tourism receipts.
to-GDP ratio is forecasted to rise from 66.3% of However, the current account deficit is
GDP in 2020 to 71.9% of GDP in 2024. expected to widen to about 3.5% of GDP in 2021
This is partly due to an anticipated swing fuelled by higher oil prices and a recovery in the
in real GDP from a pandemic and drought domestic economy. ™

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