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S&P cuts Morocco's ratings outlook to negative on budget deficit forecast

S&P Global Ratings lowered Morocco's outlook to negative from stable on its expectation that the North African country will widely miss its budget deficit target this year, leading to an increase in government debt.

The rating agency expects the Moroccan government to post a budget shortfall of about 3.8% of GDP in 2018, deviating significantly from its deficit target of 3.0% of economic output due to weak revenues and higher public spending.

"We believe that, if unchecked, persistently wide budget deficits will push government debt to higher levels that reduce the government's fiscal space when the economic growth of its trading partners, especially in Europe, decelerates," said S&P, which affirmed Morocco's long- and short-term foreign and local currency sovereign credit ratings at BBB-/A-3.

The debt watcher projects Morocco's net general government debt to average about 53% of GDP from 2018 to 2021.

Morocco's real GDP growth is forecast to decelerate to 3.2% through 2019 from 4.1% last year, before improving to about 4.0% by 2021, according to S&P.

S&P said it could hit Morocco with a downgrade within the next 24 months if the government fails to improve its budgetary position, resulting in higher-than-expected net government debt.

Morocco's ratings could also be lowered due to disappointing growth rates and further widening of external imbalances, S&P said.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.