Casablanca, Morocco – Bank Al-Maghrib, the central bank of Morocco, has reported a notable increase in non-performing loans (NPLs), which have risen by 6.3% to now account for 8.8% of all bank loans as of the second quarter of 2023. This increase in NPLs — loans that are no longer meeting repayment expectations — is a clear indicator of growing financial stress within the Moroccan economy.
The central bank’s report, emerging from its third quarterly meeting of 2023, highlights that the rise in NPLs is more pronounced among private non-financial enterprises, where they soared by 9.9% to a rate of 12.4%. This significant increase suggests that businesses are facing greater financial challenges compared to individual borrowers, whose NPLs rose by a more modest 2.8%, reaching a rate of 9.8%.
Another key aspect of the report is the contrasting trends in loan growth. Overall bank credit expanded by 5.2% as of July, but this growth is not uniform across sectors. Loans to the non-financial sector grew at a slower pace of 3.4%, hinting at either cautious lending practices or a decrease in borrowing demand in this area. In stark contrast, credit extended to financial companies surged by 17.4%, suggesting a potential realignment of bank lending strategies or heightened activity in the financial sector.
The report also points to a 10.1% decrease in liquid employment funds, an improvement compared to the 15.2% decrease noted in the previous quarter. This shift, influenced by smaller reductions in different types of bonds, might signify a change in investment strategies, potentially due to investors seeking more stable or secure options in a fluctuating economic climate.
In simple terms, these trends in Morocco’s financial landscape, as outlined by Bank Al-Maghrib, are crucial indicators. The rising NPLs, particularly in the business sector, suggest increasing economic difficulties that could potentially affect the overall stability of the banking sector. Moreover, the mixed patterns in loan growth across different sectors might reflect a changing focus in the economy, with financial institutions adjusting their lending strategies based on evolving market dynamics.
The contraction in liquid employment funds also hints at a shift in how investors are approaching the market, likely influenced by the current economic uncertainties. This collective set of trends emphasizes the changing face of Morocco’s economy and underlines the need for strategic, informed responses from businesses, investors, and policymakers to effectively address these emerging challenges.
