1. This statement provides additional information that has become available since the Staff Report (SM/22/279) was circulated to the Executive Board on December 19, 2022.

The information does not alter the thrust of the staff appraisal.

2. National accounts data for Q3 2022 were released. Real GDP growth was 1.6 percent (y/y) in Q3, slightly below staff estimate (of 1.8 percent). Leaving everything else unchanged, the Q3 outturn implies an average GDP growth for 2022 of 1.1 percent, compared to 1.2 percent projected in the staff report.

3. CPI headline inflation slightly accelerated to 8.3 percent in November (from 8.1 in October), mainly driven by food and transportation prices. Core inflation also accelerated to 7.6 percent in November (from 7.1 percent the previous month). These outcomes are in line with staff ‘s projected headline inflation of 6.5 percent on average for 2022.

4. The current account deficit widened to about 3.6 percent of GDP in Q3 2022, from about 1.9 percent in the same period in 2021, in line with staff projections. Monthly data for November showed an acceleration of tourism receipts and remittances while the trade deficit was about the same. Even if they were used to repay the Eurobond that matured in mid-December (f or about US$ 1 billion), international reserves expressed in US dollars have closed 2022 at 32.2 billion, above the staff estimate of 31.8 billion. This mainly reflects valuation changes, given the strong appreciation of the euro against the US dollar over the last quarter of 2022 and the fact that about 60 percent of Morocco’s international reserves are in euros.

5. On December 20, 2022, Bank Al-Maghrib (BAM) raised its policy rate by 50bps to 2.5 percent, after the 50 bps increase in September. The Bank cited the need to tighten monetary policy conditions to prevent inflation expectations from becoming de-anchored and preserve price stability. Indeed, 2-year -ahead and 3-year-ahead inflation expectations rose somewhat relative to last September, to 4.8 percent and 2.6 percent, respectively (from 3.7 and 2.2 percent). BAM also revised upward its inflation forecasts for 2022 an d 2023 to 6.6 percent (vs 6.3 before) and 3.9 percent (vs 2.4 before), respectively. At 4.2 percent, the average inflation projected f or 2024 is higher than staff’s (2.5 percent) due to BAM’s greater estimated inflationary impact of the removal of gas, wheat, and sugar subsides. Staff will discuss with BAM the methodology it used to assess the impact of the subsidy reform on CPI inflation, and stand ready to change the forecast for 2024 as needed.

6. Morocco’s Minister of Finance and BAM signed a memorandum of understanding in November that allowed the Treasury to use the remaining part of the funds withdrawn in 2020 under the Precautionary and Liquidity Line (PLL) arrangement to fund its domestic currency financing needs. The amount corresponds to MAD 21.1 billion (or about US 2 billion at current rates).