Morocco sees inflation at 2 pct in 2014, growth at 4.2 pct

A vendor sells traditional cakes of fried honey and flour pastries to customers ahead of Ramadan in the medina of the Moroccan city of Rabat July 8, 2013. REUTERS/Stringer

RABAT (Reuters) - Morocco expects inflation to hold steady at 2 percent this year and economic growth to slow slightly to 4.2 percent from 2013, Finance Minister Mohamed Boussaid said on Wednesday. The North African kingdom also expects its budget deficit, a source of concern for international lenders, to narrow to 3.5 percent of gross domestic product by 2016, Boussaid told a news conference. Morocco has previously said its decision to raise energy prices, the first of a series of reforms to subsidies required under a deal with the International Monetary Fund, would hurt economic growth in 2014 by slowing domestic demand. The government estimates inflation in 2013 at 2 percent and annual economic growth at 4.8 percent. The IMF, which approved a $6.2 billion precautionary credit line for Morocco two years ago, has pushed Rabat to overhaul its fuel subsidy regime and tighten control of public wages and pensions to help bring down the budget deficit. The government estimates the deficit to have stood at 5.5 percent of GDP in 2013 and says it will fall to 4.9 percent this year. Morocco spent heavily on food and energy subsidies and higher public sector salaries in 2011 and 2012 to defuse the kind of social discontent that helped to oust rulers elsewhere.