Morocco’s inflation rate rose to 5% year-on-year in August, up from 4.9% in July, according to the latest report from the Higher Commission of Planning (HCP). The main factor behind this increase was the sharp rise in food prices, which jumped by 10.4% compared to the same month last year. Non-food inflation, on the other hand, rose by only 1.3%.
The HCP report attributed the surge in food prices to the higher costs of fruits, vegetables, milk, cheese, eggs, coffee, tea, and cocoa. These products saw their prices increase by 2.8%, 2.7%, 0.2%, and 0.2%, respectively, on a monthly basis. Meanwhile, the prices of meat, fish, seafood, oils, and fats declined by 2%, 0.8%, and 0.7%, respectively.
The HCP also noted that the core inflation index, which excludes volatile and regulated products, rose by 4.9% year-on-year in the first eight months of 2023.
Morocco faces supply shocks and drought
The high inflation rate in Morocco is partly due to the supply shocks caused by the COVID-19 pandemic and the global rise in commodity prices. The country relies heavily on imports of food and energy products, which have become more expensive in the international market.
Moreover, Morocco has been suffering from a severe drought that has affected its agricultural output and food security. The country’s cereal production is expected to drop by 42% in 2023 compared to the previous year, according to the Ministry of Agriculture. This will likely lead to higher food imports and lower exports, worsening the country’s trade balance.
The drought has also reduced the availability of water for irrigation and domestic use, posing a serious challenge for the country’s economic and social development.
Morocco adopts policy measures to mitigate inflation
To cope with the inflationary pressures and the adverse effects of the supply shocks, Morocco has adopted a series of policy measures to support its economy and protect its vulnerable population.
The country has maintained a flexible exchange rate regime that allows it to adjust to external shocks and preserve its external competitiveness. The central bank has also kept its key interest rate at 1.5% since March 2020 to stimulate credit growth and economic activity.
In addition, Morocco has implemented a comprehensive social protection program that covers more than 22 million people with cash transfers, health insurance, pensions, and education subsidies. The program aims to reduce poverty and inequality and improve human capital.
Furthermore, Morocco has continued to pursue structural reforms to enhance its economic resilience and diversification. The country has launched several initiatives to boost its green economy, digital transformation, industrial development, and regional integration.
Morocco expects lower inflation in 2024
Despite the high inflation rate in 2023, Morocco expects it to decline to 1.8% in 2024, according to the HCP’s forecast. The HCP anticipates that the food inflation will ease as the agricultural production recovers from the drought and the global commodity prices stabilize.
The HCP also projects that the non-food inflation will remain moderate as the domestic demand remains subdued due to the pandemic’s impact on income and employment.
The HCP’s outlook is in line with the International Monetary Fund (IMF), which also expects Morocco’s inflation rate to fall below 2% in 2024. The IMF praised Morocco’s prudent macroeconomic policies and structural reforms that have helped it cope with the recent shocks and maintain its economic stability.