Morocco: banking sector resilient despite the breakthrough of COVID-19 (IMF)

At the end of its remote mission to Morocco, from October 19 to November 2, 2020, as part of the 2020 consultations under Article IV of the IMF’s statutes, the institution zoomed in on the Moroccan banking sector. Thus, the IMF has noticed that banks have been relatively resilient in the face of the pandemic, thanks to their relatively high initial levels of capital and liquidity and the vigorous response of Bank Al-Maghrib (BAM).

Staff are pleased to note that BAM has decided to ask banks to increase their provisions and suspend dividend distribution this year in order to guard against a possible deterioration in the bank loan portfolio in the near future. BAM, they argue, continues to actively monitor the repercussions of the crisis on the quality of bank assets while continuing, in coordination with the Ministry in charge of finance, to finalize the resolution mechanism in order to strengthen the authorities’ panoply of instruments.

The institution recommended that Morocco advance the structural reform program to solidify recovery from the pandemic and achieve stronger, resilient and inclusive growth, which improves the standard of living of all Moroccans. Meanwhile, the IMF has said it expects Morocco’s GDP growth to rebound to 4.5% next year, on the assumption that the effects of drought and pandemic fade. , but this benchmark projection is subject to considerable downside risks.

Under the combined effect of the drought and the COVID-19 pandemic, he points out, GDP is expected to contract within a range of 6 to 7% in 2020 depending on the evolution of this pandemic. The financial institution also forecast a sharp rise in the unemployment rate. Budgetary and external deficits are expected to widen, owing to lower tax revenues and lower foreign exchange earnings from tourism.

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