Moody’s change outlook on Morocco’s rating to positive

A woman walks past a branch of the Co-operative Bank in central London, in this file photo. (Reuters)
Updated 28 February 2017
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Moody’s change outlook on Morocco’s rating to positive

JEDDAH: Moody’s Investors Service has changed the outlook on Morocco government’s rating to positive from stable and affirmed the issuer and senior unsecured ratings at Ba1.
The country’s current account deficit has improved to an estimated 3.8 percent of gross domestic product (GDP) at the end of 2016 from a deficit of 9.5 percent in 2012.
Moody’s expects the current account deficit to remain around the 4 percent of GDP level over the forecast horizon, with oil prices projected to remain in the $40-$60 range.
The fiscal deficit of Morocco has declined steadily to 4 percent of GDP at the end of 2016 from 7.3 percent in 2012, driven mainly by the reduction in the energy subsidy bill to about 1.2 percent of GDP from 6.5 percent in 2012.
The decision to affirm Morocco’s Ba1 rating balances an institutional environment, which is supportive of structural reforms, as illustrated by the country’s industrialization and renewable energy strategy, against low-wealth levels, a volatile and subdued growth pattern, and a comparatively high public debt stock relative to similarly rated peers.
As the main driver of event risk, the Moroccan banking sector’s foray into sub-Saharan Africa represents both an opportunity to diversify and to expand its market share, as well as a challenge in terms of cross-border supervision and risk management.
The first driver for Moody’s decision to change Morocco’s rating outlook to positive is the country’s improving external position in the wake of lower nominal oil imports and resilient export sectors.
Morocco’s export performance is supported by the diversification into higher value-added automotive, aeronautics and electronics sectors, which have together overtaken the more traditional exports in the phosphate, agriculture or textile sectors, and which continued to expand at double-digit rates in 2016. Moody’s expects the country’s export performance in these new sectors to remain dynamic in response to their increased integration in the global production chain.
The Ba1 rating also captures Moody’s political risk assessment, which is based on the delays in the formation of a new government following the elections in October last year, in addition to potential regional tensions related to the disputed Western Sahara territory.
Morocco’s foreign- and local-currency ceilings remain unchanged, namely the long-term foreign-currency bond ceiling at Baa2, the long-term foreign-currency deposit ceiling at Ba2, and the long-term local-currency bond and deposit ceilings at Baa1. The short-term foreign-currency bank deposit ceiling remains unchanged at NP, and the short-term foreign-currency bond ceiling at P-2.


Saudi Arabia, Russia and China give EU trade reforms thumbs down at WTO

Updated 13 min 43 sec ago
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Saudi Arabia, Russia and China give EU trade reforms thumbs down at WTO

  • China is suing US and EU at WTO
  • Kingdom warns new rules are concerning

The EU’s new rules against countries dumping cheap goods on its market got a rough ride at a World Trade Organization meeting, where China, Russia and Saudi Arabia led a chorus of disapproval, a trade official said on Thursday.

The EU, which is in a major dispute with China about the fairness of Chinese pricing, introduced rules last December that allow it to take into account “significant distortions” in prices caused by government intervention.

A Chinese trade official told the WTO’s anti-dumping committee that Beijing had deep concerns about the new methodology, saying it would damage the WTO’s anti-dumping system and increase uncertainty for exporters, an official who attended the meeting said.

China argued that the concept of “significant distortion” did not exist under WTO rules, and the EU should base its dumping investigations on domestic prices in countries of origin, such as China.

The EU reformed its rules in the hope they would allow it to keep shielding its markets from cheap Chinese imports while fending off a Chinese legal challenge at the WTO.
China said that when it joined the WTO in 2001, the other member countries agreed that after 15 years they would treat it as a market economy, taking its prices at face value.

But the US and the EU have refused, saying China still subsidises some industries, such as steel and aluminum, which have massive overcapacity and spew vast supplies onto the world market, making it impossible for others to compete.

China is suing both the US and the EU at the WTO to try to force them to change their rules.

Legal experts say the dispute is one of the most important in the 23-year history of the WTO, because it pits the major trading blocs against each other with fundamentally opposing views of how the global trade rules should work.

In the WTO committee meeting, Saudi Arabia said the new rules were very concerning, and it challenged the EU to explain how EU authorities could ensure a fair and objective assessment of “significant distortion.”

Russia said the EU rules violated the WTO rulebook and certain aspects were unclear and created great uncertainty for exporters. Bahrain, Argentina, Kazakhstan and Oman also expressed concerns.

But a US trade official said the discussion showed that appropriate tools were available within the WTO to address distortions affecting international trade.