Moody’s Investors Service has changed the outlook on Morocco government’s rating to positive from stable and affirmed the issuer and senior unsecured ratings at Ba1.
The country’s current account deficit has improved to an estimated 3.8 percent of gross domestic product (GDP) at the end of 2016 from a deficit of 9.5 percent in 2012.
Moody’s expects the current account deficit to remain around the 4 percent of GDP level over the forecast horizon, with oil prices projected to remain in the $40-$60 range.
The fiscal deficit of Morocco has declined steadily to 4 percent of GDP at the end of 2016 from 7.3 percent in 2012, driven mainly by the reduction in the energy subsidy bill to about 1.2 percent of GDP from 6.5 percent in 2012.
The decision to affirm Morocco’s Ba1 rating balances an institutional environment, which is supportive of structural reforms, as illustrated by the country’s industrialization and renewable energy strategy, against low-wealth levels, a volatile and subdued growth pattern, and a comparatively high public debt stock relative to similarly rated peers.
As the main driver of event risk, the Moroccan banking sector’s foray into sub-Saharan Africa represents both an opportunity to diversify and to expand its market share, as well as a challenge in terms of cross-border supervision and risk management.
The first driver for Moody’s decision to change Morocco’s rating outlook to positive is the country’s improving external position in the wake of lower nominal oil imports and resilient export sectors.
Morocco’s export performance is supported by the diversification into higher value-added automotive, aeronautics and electronics sectors, which have together overtaken the more traditional exports in the phosphate, agriculture or textile sectors, and which continued to expand at double-digit rates in 2016. Moody’s expects the country’s export performance in these new sectors to remain dynamic in response to their increased integration in the global production chain.
The Ba1 rating also captures Moody’s political risk assessment, which is based on the delays in the formation of a new government following the elections in October last year, in addition to potential regional tensions related to the disputed Western Sahara territory.
Morocco’s foreign- and local-currency ceilings remain unchanged, namely the long-term foreign-currency bond ceiling at Baa2, the long-term foreign-currency deposit ceiling at Ba2, and the long-term local-currency bond and deposit ceilings at Baa1. The short-term foreign-currency bank deposit ceiling remains unchanged at NP, and the short-term foreign-currency bond ceiling at P-2.

Source: Arab News