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imageRABAT: Morocco's central bank held its benchmark interest rate at 3 percent on Tuesday; forecasting inflation would be above its average of recent years but would stay in line with its price stability objective in the medium term.

"Taking into account the expected level of international oil prices and the subsidy expenditures set in the Finance Bill 2014, inflation is projected at 2.1 percent in 2013, 2.5 percent in 2014," the central bank said in a statement.

The Moroccan government began to index oil prices partly to international levels in September to reduce its subsidies and meet international lenders' requirements.

For the January-October period, subsidies fell by 22.4 pct compared with last year to 35.6 billion dirhams after energy prices dropped in the international market.

The central bank said the budget deficit should be around 5.5 percent of GDP this year as a result of the drop in subsidy costs, efforts to control expenses and the collection of donations.

The central bank expects the economy to grow 4.5 to 5 percent in 2013 and 2.5 to 3.5 percent in 2014 based on a medium-sized agricultural harvest.

The bank said the current account deficit is likely to narrow to 7.4 percent of GDP in 2013 from 10 percent in 2012, and the stock of net international reserves would reach 145.5 billion dirhams ($17.80 billion) or the equivalent of 4 months of goods and services imports by the end of the year, the bank said.

Morocco began sensitive subsidy reform earlier this year to hold on to a $6.2 billion precautionary credit line from the IMF.

Copyright Reuters, 2013

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