Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or at minimum each six months in the cases of sovereign, sub-sovereign and supranational organisation issuers.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial-market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit’s performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key ratings assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review of the Kingdom of Morocco (long-term local- and foreign-currency issuer and senior unsecured debt ratings: BB+/Stable; short-term local- and foreign-currency issuer rating: S-3/Stable) on 20 February 2024.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated ratings history can be found on www.scoperatings.com.

Key rating factors

For the updated Rating Report accompanying this review, click here.

Morocco’s BB+/Stable ratings are driven by i) sound and credible economic institutions, including enhanced monetary and fiscal policy frameworks, supporting macro-economic stability and effective policymaking; ii) steady market access and strong funding flexibility and a favourable debt profile, underpinned by good access to domestic and international markets as well as to official sector financing; and iii) robust structural reform momentum, expected to be sustained under the New Development Model.

Conversely, credit challenges relate to i) a low growth potential despite moderate wealth levels and modest economic diversification; ii) elevated public debt coupled with rising spending pressures and elevated contingent liabilities; and iii) high social risks underpinned by poor employment prospects and high inequality.

The Moroccan economy has been resilient to the September 2023 earthquake, with real GDP growth increasing to 2.8% in Q3 2023, from 2.3% in Q2 2023. Mitigating factors include the localisation of the epicentre, which was far away from the manufacturing industries, main tourism centres and agricultural production. Scope projects real GDP growth at 3.2% in 2024 and 3.4% in 2025, after an estimated 2.9% in 2023.

Morocco’s fiscal deficit is projected to decline modestly from 4.5% of GDP in 2023 to 4.1% in 2024 and 3.8% in 2025 due to rigidities in public expenditure (transfers, subsidies, investment) and a constrained revenues base (27% of GDP) reflecting moderate GDP per capita in power purchasing terms (USD 10,408). In addition, the authorities announced a five-year reconstruction plan (MAD 120bn, or 8% of GDP), alongside the implementation of the New Model of Development (about 4% of GDP annually by 2025). Balancing the moderate growth and inflation outlook (estimated at 2.5% for 2024), and the gradual improvement in the primary balance, Scope projects a modest decline of general government debt to 67.7% of GDP in 2028, down from 70.9% in 2023.

Moreover, financial support from multilateral lenders provides a cushion to Morocco’s public finances. The IMF approved a USD 1.3bn Resilience and Sustainability Facility to support the country’s climate transition and strengthen resilience against adverse weather conditions and natural disasters, while the European Investment Bank pledged EUR 1.0bn lending over the next three years to support the reconstruction programme.

The Stable Outlook reflects Scope’s opinion that risks to the ratings are balanced.

The ratings/Outlooks could be upgraded if, individually or collectively, Morocco’s: i) structural reforms progress materially and set the stage for more inclusive, resilient, and sustainable economic growth; ii) there is tangible progress on the government’s fiscal strategy and budgetary consolidation plans, for instance, via a widening of the tax base or elimination of subsidies; and/or iii) governance quality improves substantially thanks to institutional reforms.

Conversely, the ratings/Outlooks could be downgraded if, individually or collectively, Morocco’s: i) public finances deteriorate, for instance, due to a rising interest burden, overly loose fiscal policy, or the crystallisation of contingent liabilities; ii) the external position deteriorates, for instance, due to weakening reserve holdings or balance of payment pressures; and/or iii) social and/or geopolitical tensions worsen, affecting policy credibility, and/or institutional and macro-economic stability.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 29 January 2024) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst Thomas Gillet, Director

© 2024 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5, D-10785 Berlin.