(Adds bank’s chief comments on currency system, byline)
By Aziz El Yaakoubi
RABAT, Sept 27 (Reuters) - Morocco’s central bank held its benchmark interest rate at 2.25 percent on Tuesday, saying its inflation forecast remained consistent with its price stability objective even as it forecast a jump in economic growth in 2017.
The Bank al-Maghrib — its formal name — said it expected inflation to remain at around 1.6 percent in 2016 and fall to 1.2 percent in 2017.
Anticipating a rebound in agricultural output in 2017 from the worst drought in decades to hit North Africa, the bank said growth would jump to 4 percent next year from an estimated 1.4 percent in 2016. It had previously forecast 1.2 percent growth for 2016.
The bank lowered its key rate to 2.25 percent from 2.5 percent in March, its first cut in more than a year, to support the economy, about 15 percent of which is farming.
Bank al-Maghrib had been preparing to introduce a flexible exchange rate system in the early part of 2017 but governor Abdellatif Jouahri said that change will be postponed until the second half of 2017 to give more preparation time.
“We will launch an awareness campaign to explain to different players including the finance ministry, banks, media and others that it is a structural turning point,” he told reporters.
Morocco has done more than most North African countries to make painful reforms required by international lenders to curb deficits, such as an end to fuel subsidies and a freeze on public sector hiring. The Rabat government still controls wheat and cooking gas prices.
Based on an average global oil price of $42.4 a barrel, the bank said, the current account deficit should ease to 1.9 percent of gross domestic product in 2016 and 1.2 percent in 2017. The trade deficit widened by 13 percent over the first eight months of 2016, reflecting a significant rise in imports.
The bank said the budget deficit would narrow to 3.8 percent of GDP in 2016 if the government maintained its current fiscal policy, and fall to 3.2 percent in 2017.
Foreign exchange reserves will continue to increase, it said, though at a slower rate than previously expected, to stand at around seven months and six days of import needs at the end of 2016 and seven months and 20 days at the end of 2017. (Editing by Catherine Evans)