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Monday 9 July 2018

Macroeconomic Risks Remain 'Broadly Moderate' amid Stronger Global Economic Activity: Central Bank

Vocal synthesis
Macroeconomic Risks Remain 'Broadly Moderate' amid Stronger Global Economic Activity: Central Bank

Macroeconomic risks remain broadly moderate amid stronger global economic activity, Bank Al Maghrib (Morocco's central bank) said.

In terms of external conditions, the current account deficit narrowed in 2017, mainly due to easing trade deficit and higher travel receipts and transfers from Moroccans living abroad, the bank said in a press release following the 7th meeting of the Coordination and Systemic Risk Monitoring Committee held in Rabat.

Under these conditions, net international reserves reached 240.9 billion dirhams in 2017, providing coverage for 5 months and 21 days of imports of goods and services, it added.

"Domestically, national growth accelerated in 2017 to 4.1 percent from 1.1 percent in 2016, reflecting the rebound in agricultural value added and the recovery, albeit at a slow pace, in non-agricultural activities."

At the same time, fiscal adjustment resumed after a halt in 2016, the source said, adding that the rate of Treasury’s debt, although slightly up in 2017, should trend downward as of 2018.

The trend in global growth would be generally favorable, although surrounded by certain risks mostly related to the escalation of geopolitical tensions, the rise of protectionism and the political difficulties of some European countries, it noted, adding that national GDP would grow less rapidly, by 3.6 percent in 2018 and 3.1 percent in 2019.

In a context of slow non-agricultural recovery, bank lending to nonfinancial corporations (NFC) slightly decelerated, covering in particular a slowdown in credit to public corporations and a moderate increase in loans to private corporations, while the rate of NFCs’ nonperforming loans declined somewhat but remains high. 

Despite a still-risky environment, the banking sector consolidated its financial position. In terms of profitability, banks’ cumulative profit improved compared to the normative income of 2016, owing to lower credit risk cost and a good performance abroad.

The insurance sector continues to be strong, the bank said. Return on equity rose to 10.6 percent in 2017 as against 9.4 percent in 2016. Unrealized gains which may be generated by the asset portfolios of insurance and reinsurance companies increased anew due to the good performance of the stock market in 2017.

At the prudential level, insurance and reinsurance companies’ coverage ratio for technical liabilities are above regulatory minima.

With regard to pension schemes, the parametric reform of the civil pension scheme, run by Caisse Marocaine de Retraite (Moroccan Pension Fund), which was carried out in 2016 allowed balancing future pension rights for affiliates but did not redress the overall balance of this scheme which has entered into structural deficit since 2015, the source said, adding that the dates of pension reserves’ depletion did not change markedly from the projections of 2016 and continue to be closely monitored.

In the stock market, activity in the primary market remains weak, as the raised capital since early 2018 reached 501 million dirhams, but a new company was listed. The draft General Regulation of the Stock Market, currently in the process of adoption, is expected to encourage financing through the stock market by establishing adapted compartments and creating an alternative market to meet to the needs of medium and small businesses, it said.

During this meeting, the Committee approved the Financial Stability Report for the year 2017, analyzed the mapping of systemic risks and reviewed the state of progress in the inter-authorities roadmap for strengthening financial stability for the period 2016-2018.

The Committee also discussed and approved the roadmap for monitoring cyber risks in the Moroccan financial system.

MAP 07 July 2018