Q1 GDP grew by +3.2%, in line with our expectations, including observed non-agriculture output acceleration (+3.3% y/y) while one-off effects that drove 2017 growth to +4.2% (agriculture output recovery from very low crops in 2016) are no longer present in 2018. But downside risks have now emerged. Morocco is particularly exposed to oil price spikes. Inflation has rebounded and should reach +2.5% on average in 2018 (a 10-year peak) and may well impact household purchasing power. The risk could be quite sizable since the labor market remains sticky (job creation is low) with the ability to cut overall Moroccan growth by -0.5pp. The current account deficit is likely to be impacted by a higher import bill as well, by -1pp (from current expectations of -4% of GDP this year). Such a scenario would also mean a slight deterioration of the import cover by forex reserves to 5.5 months – though still in the comfort zone. Overall, we do no longer see upside risks to our 2018 GDP growth forecast of +3%.
