Morocco Feels the Heat: Why is Inflation Creeping Back Up?
After a period of relative calm, morocco-trade-deficit-widens-in-first-half-2024/” title=”Morocco's Trade Deficit Widens in First Half of 2024″>inflation is showing signs of life again in Morocco. What’s driving this resurgence, and should we be worried?
New data reveals that inflation in Morocco ticked upwards this past June, reaching 1.8% compared to the same time last year. This uptick is largely attributed to a rise in food prices (1.7%) and non-food items (1.9%). While healthcare costs saw a welcome dip of 1.2%, the “housing, water, electricity, gas, and other fuels” category experienced a sharper rise of 3.7%.
Badr Zazhar Al-Azraq, an Economics expert and Professor of Business Law, suggests that this recent inflationary bump should be viewed within the context of Morocco’s current economic landscape. He points to two key factors: recent wage increases and a decrease in the benchmark interest rate.
Wage increases, a result of agreements between the government and various public and private sectors, have injected more money into the pockets of Moroccan households. Simultaneously, the central bank’s decision to lower the benchmark interest rate has made borrowing more attractive, further stimulating spending.
While these measures may not have directly translated into a tangible increase in purchasing power, they have undeniably boosted domestic demand. This surge in demand, particularly noticeable in June and July, is further amplified by the summer season, a time when Moroccan families traditionally spend more on leisure and travel.
Al-Azraq remains optimistic, predicting that these figures won’t exceed 2% by the year’s end. This projection aligns with the High Commission for Planning’s (HCP) forecast of a stable 2% average inflation rate for the coming year.
It’s worth noting that core inflation, which excludes volatile items like energy and food, also saw an uptick. It rose by 3% compared to May and 2.4% compared to June of the previous year.
What does this mean for everyday Moroccans?
While a slight increase in inflation is not unusual, especially given the factors at play, it’s essential to keep a watchful eye on its trajectory. The interplay between wage increases, interest rates, and seasonal demand will continue to shape the economic landscape in the coming months.
For the average consumer, this could mean slightly higher prices at the grocery store and beyond. However, the hope is that these increases will be offset by the positive effects of increased wages and economic activity.
The coming months will be crucial in determining whether Morocco can maintain this delicate balance and keep inflation in check.
