(Bloomberg) -- Morocco cut interest rates for the second time this year, easing borrowing costs to encourage a massive investment drive that includes preparations to co-host the 2030 FIFA World Cup.
Bank al-Maghrib lowered the benchmark interest rate by 25 basis points to 2.5% at its latest quarterly policy meeting on Tuesday. The central bank made its first cut in four years in June, before holding in September.
The reduction, to the lowest rate since 2023, is motivated by inflation that’s “in line with the price stability objective” and high geopolitical uncertainty, the regulator said in a statement.
Predictions had been broadly split over Tuesday’s decision, despite annual inflation easing to 0.7% in October from 10.1% in early 2023. A poll by a unit of Morocco’s biggest lender, Attijari Global Research, found 45% of investors expected a cut and the rest a hold. Another survey by Bank of Africa unit BKGR Research had 40% foreseeing a reduction.
Inflationary pressures remain. Limited rains are stoking fears of another drought in the North African kingdom, which would hit an already battered farming sector and may affect prices and supplies. Inflation is expected to rise to 2.4% next year from 1% projected for 2024 and 6.1% last year, the regulator said.
Other parts of the economy, however, are performing well, with a decline in the budget deficit and record tourism figures, BKGR’s analysts said. Morocco registered 15.9 million arrivals in the first 11 months of the year, the government said last week, above previous projections.
Another draw for foreign visitors will be the 2030 football World Cup, which Morocco is due to host with Spain and Portugal. The first time the championship is partly held in North Africa, it will involve billions of dollars of spending on stadiums and infrastructure.
That outlay will come in addition to spending on rebuilding areas around the Atlas mountains damaged by a September 2023 earthquake and developing key parts of the Western Sahara.
A BKGR poll of local institutional investors showed all expect either one to two rate cuts in 2025.
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