RABAT- Morocco's central bank cut its benchmark interest rate on Tuesday by 25 basis points to 2%, saying the move would help shore up economic activity following drought and the outbreak of coronavirus.

Morocco's economy is now expected to grow by 2.3% in 2020 rather than by the 3.8% previously forecast, the bank said in a statement following its quarterly board meeting. Morocco's economy grew by 2.3% in 2019.

Inflation, affected mainly by food prices, will rise to 0.6% in 2020, from 0,3% in 2019, it said.

Drought slashed estimates of Morocco's cereals output to 4 million tonnes, the bank said.

The coronavirus outbreak has prompted Morocco to suspend all international flights and to close schools, mosques, non-essential shops, restaurants and cafes.

Both the textile and tourism sectors are likely to be hit hard by the travel restrictions. Tourism represents 11% of Morocco's economy, with 13 million tourists arriving in 2019.

However, an expected lower import bill and rising automotive exports will help to narrow the current account deficit to 3.5% of gross domestic product from 4.4% last year.

Foreign exchange reserves will grow to 246 billion Moroccan dirhams ($25.5 billion) in 2020 from 245.6 billion dirhams in 2019, taking into acount an international bond Morocco plans to issue this year.

(Reporting by Ahmed Eljechtimi; Editing by Alex Richardson and Gareth Jones) ((ahmed.eljechtimi@thomsonreuters.com;))