RABAT, Jan 4 (Reuters) - Morocco's economy grew 1.2 percent year-on-year in the fourth quarter, the country's planning agency said on Wednesday, at the end of a year in which a harsh drought hurt the key agriculture sector.
The agency forecast national output would expand 3.9 percent in the first quarter of 2017, buoyed by a surge in farming output which slumped 12.3 percent in the final three months of 2016 following North Africa's worst drought in decades.
Morocco said 2016's cereal harvest plummeted 70 percent to 3.35 million tonnes from 2015's record 11 million tonnes. Agricultural output would increase 11.1 percent in the first quarter of 2017, the agency said.
Farming accounts for more than 15 percent of Morocco's more-than $100 billion economy and is the country's biggest employer.
Growth in Morocco's non-agricultural sectors accelerated to 2.5 percent in the fourth quarter from 1.9 percent in the previous three months, the agency said.
Morocco's central bank predicts economic growth will jump to 4.2 percent in 2017 from an estimated 1.2 percent last year on the back of a sharp increase in agricultural output.
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.
It is also preparing to introduce a flexible exchange rate system later this year.
The planning agency did not give an updated estimate of its 3.5 percent growth forecast for 2017.
"Household spending increased 2.8 from a year ago against a 2.9 percent rise in the previous three months, as remittances from the Moroccans living abroad improved by 1.8 percent and consumer credits jumped 5.3 percent," the agency said.
Domestic consumption has been an important engine of growth in the North African kingdom.
(Reporting By Aziz El Yaakoubi; editing by John Stonestreet and Richard Lough) ((aziz.elyaakoubi@thomsonreuters.com; +212623934595)(;))
