EM CEEMEA CREDIT: MOROC: macro read supportive
Mar-26 11:55
Kingdom of Morocco (MOROC; Ba1/BB+pos/BB+)
- The latest IMF update of macroeconomic projections following its Resilience and Sustainability Facility (RSF) Third Review (under 2024 Art. IV Consultations) provide a supportive read for credit. Looking at the projections for ’25, real GDP growth is indicated at 3.3% with a stable trajectory to 3.4% in ’29. Unemployment is seen at 11.5%, declining towards 10.5%. Meanwhile, inflation remains tamed, with avg ’25 projected at 2.5% and heading towards 2% over the above horizon.
- The central govt fiscal deficit is projected at 3.8% in ’25 on the back of fiscal consolidation, trending towards 3%. Debt/GDP below 70% mark is seen as trending towards 66.1% on growth and restrained fiscal spending. The sustainability of the central govt public debt is underpinned by domestic holdings, long dated nature and proportion of local ccy denomination. We view this as supportive.
- The BoP shows a lowering trend for current account deficit with ’25 projections at 2.8% and stable below the 3% mark thereafter. There is a structural merch. trade deficit at 18.2%, which shows vulnerability of exports (France and Spain) to changes in European economic growth. External debt is seen just below the 50% mark but projected to grow towards 54.2% by ’29. We hold a neutral take on this.
- Whilst increasingly self-reliant, Morocco scores well in terms of criteria to qualify for the Fund’s Flexible Credit Line (FCL). Its economy has shown resilience to negative shocks (subsequent water droughts and recent earthquake).
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BOE: Ramsden speech to headline the week
Feb-24 11:48
- We will hear from both Dhingra and Ramsden outside of the BOE's Agenda for Research (BEAR) conference (this week). We think that the speech from Ramsden has the potential to be the most interesting for macro markets this week.
- Ramsden is due to speak at Stellenbosch University in South Africa on Friday at 7:00GMT (as well as chairing the BEAR discussion). He voted in favour of the enacted cuts in August, November and February. He also dissented in favour of a sequential 25bp cut in December and favoured an earlier first cut (first voting for 25bp cuts in May and June). His previous speeches have been quite focused on how wage growth impacts service price inflation but we haven't heard directly from him since the BOE Agents' Pay Survey pointed to 3.7% pay growth in 2025 (the last time he spoke the early indications of the survey were pointing to 2-4% but this was narrowed to 3-4% in December when he first dovishly dissented). It would be a surprise if he did not vote for sequential cuts in the near-term, after voting for the December cut. We will be watching his Friday speech for any change in tone, as well as any indication on where he estimates the neutral rate to be.
- Swati Dhingra is also due to speak twice this week: tonight at 18:00GMT on the state of UK monetary policy as well as on Wednesday at NIESR on "Trade fragmentation and monetary policy." Her views are unlikely to be market moving, however. She has been consistently dissenting on the dovish side and in February joined Mann in voting for a 50bp cut. She may repeat this 50bp cut vote in March - but whether she votes for a 25bp cut or a 50bp cut should make little difference to the wider MPC.
GERMANY: Far-Left Die Linke Expects To Be Involved In Debt Brake Reform Talks
Feb-24 11:43
Reuters reports comments attributed to the 'leader' of Germany's far-left progressive Die Linke regarding reform to the constitutional debt brake following the election. Says that the next gov't 'has to move on debt brake reform', and that Die Linke supports such a move, but the support will be conditional. Says that Die Linke 'will have to discuss very seriously' how far it is willing to go on debt brake reform and that the party expects to be included in talks.
- As a party from the far-left, Die Linke is strongly in favour of increased gov't spending and not just reforming but abolishing the debt brake. However, as a pacifist party it is also strongly opposed to increased military spending either to support Ukraine or to bolster Germany's armed forces as the US shifts its focus away from Europe.
- Given Die Linke's support for debt brake reform is essential (its lawmakers combined with the far-right Alternative for Germany constitute a one-third blocking minority), the party will seek concessions from the incoming gov't, set to be led by conservative Christian Democratic Union leader Friedrich Merz.
- Note: Wire headlines claim Die Linke 'leader' has made these comments. Die Linke does not have one leader, but co-chairpersons (Ines Schwerdtner and Jan van Aken) and in the election had joint lead candidates (van Aken & Heidi Reichinnek). It is unclear which of these individuals has made the comments being reported.
OUTLOOK: Price Signal Summary - WTI Support Has Been Pierced
Feb-24 11:38
- On the commodity front, a bull cycle in Gold remains in play and the yellow metal continues to trade at its recent highs. Fresh recent gains once again confirm a resumption of the uptrend and maintain the bullish price sequence of higher highs and higher lows. Moving average studies are in a bull mode position too, highlighting a dominant uptrend. Sights are on the $2962.2, a 2.00 projection of the Nov 14 - Dec 12 - 19 price swing. The first key support to watch is $2867.1, the 20-day EMA.
- In the oil space, a bearish theme in WTI futures remains intact and the move lower last week, and today’s fresh short-term cycle low, reinforces a bear condition. Support at $70.20, the Feb 6 low, has been pierced. A clear break of it would strengthen the downtrend and confirm a breach of the 50-day EMA. This would open $67.75, the Dec 20 ‘24 low. Key short-term resistance has been defined at $74.06, the Feb 3 high. A move above this level would reinstate a bull theme.
