Moody's Investors Service has changed the outlook on Morocco's Ba1 government bond rating to negative from stable. The Ba1 rating itself remains unchanged.
The key drivers of the decision to change the outlook to negative are as follows:
The significant deterioration in the government's fiscal metrics, as reflected in rising budget deficits since 2011. This is due to the country's decision to increase public-sector wages and let the subsidy bill rise in response to rising oil prices so as to maintain social peace. Moody's expects the deficit to have remained significant in 2012. As a consequence, the public debt ratio, which had been on a declining path until 2009, is now increasing again.
Very large external deficits and high external funding requirements. Moody's estimates that the current account deficit amounted to close to 10% of GDP in 2012 and also is likely to remain at an elevated level in 2013, compared with a broadly balanced current account as recently as 2007. While the Precautionary and Liquidity Line -- granted by the International Monetary Fund (IMF) in July 2012 -- provides some comfort as it can contribute a substantial share of the required external financing, Morocco's external funding requirements are large at around 10% of GDP.
Moody's has also lowered Morocco's local-currency bond and deposit ceiling to Baa1 from A3. The foreign-currency bond and deposit ceilings remain unchanged at Baa2/P-2 and Ba2/NP, respectively.
|moodys.com
