By CentralBankNews.info
      Morocco’s central bank continued to keep its monetary policy rate at 2.25 percent, unchanged since March 2016, saying underlying inflation remains moderate despite the recent rise in headline inflation which is based on changes to the consumer price index along with higher prices of volatile food products and tariffs on regulated prices.
       Underlying inflation is forecast to average 1.1 percent this year and 1.6 percent in 2019, the Bank of Morocco, or Bank Al-Maghrib (BAM), said. This forecast is down from March when BAM forecast 2018 underlying inflation of 1.4 percent and 1.9 percent in 2019.
      Morocco’s headline inflation rate rose to 2.7 percent in May from 2.5 percent in April and BAM expects inflation to average 2.4 percent this year and then ease to 1.4 percent in 2019.
      The forecast for 2018 headline inflation is sharply up from the previous forecast in March of 1.8 percent while the 2019 forecast is largely similar to the previous 1.5 percent forecast.
      After slowing in 2016, Morocco’s economy recovered last year and is forecast to continue to expand this year on good agricultural production and improved non-agricultural activities.
      Last year Morocco’s economy grew by 4.1 percent, up from 1.1 percent in 2016, and BAM forecast 3.6 percent growth this year and 3.1 percent in 2019.
      In March BAM raised its 2018 growth forecast to 3.3 percent from 3.0 percent but lowered its 2019 forecast to 3.5 percent from 3.6 percent.
      Exports from Morocco are expected to continue to rise this year, with exports and the automotive industry getting a boost next year from start of production at the Peugeot Citroen plant near Rabat which is planned to produce 100,000 cars next year before total output of 200,000 vehicles and 200,000 engines at its final stage.
     BAM forecast goods export to rise 5.8 percent this year and 6.9 percent in 2019, with tourism revenue up 8 percent this year and 4 percent in 2019.
      The current account deficit is seen easing to 3.6 percent of GDP in 20189 from 4.1 percent this year while foreign exchange reserves are seen ending this year at 255.4 billion dirhams and 245.9 billion by end-2019, enough for more than 5 months of imports.
      In January last year Morocco introduced a more flexible exchange rate system by widening the dirham’s fluctuation band against hard currencies to 2.5 percent on either side from 0.3 percent for a total range of 5.0 percent.
      The dirham is mainly pegged to the euro but last year BAM reduced the euro weight to 60 percent from 80 percent and raised the U.S. dollar weighting to 40 percent from 20 percent.