Inflation: I’m here, I’m here

LAccording to Ahmed Lahlimi of the High Commission of Planning (HCP), inflation may even become a structural factor. However, it is strongly felt by citizens. Daily. The latest figures from HCP confirm this.

The Consumer Price Index in June 2022 increased by 0.5% compared to the previous month. This variation resulted from a 0.1% rise in the food index and a 0.8% rise in the non-food index.

Compared to the same month of the previous year, the Consumer Price Index recorded an increase of 7.2% in June 2022, resulting in an increase of 10.6% in the food index and 4.9% in the non-food index. %

Under these conditions, the core inflation indicator excluding volatile priced products and general priced products would have increased by 0.8% in June 2022 compared to May 2022 and 6.4% compared to June 2021.

Very expensive items

Shopping carts are increasingly expensive to fill. Almost all prices went up. Thus, the increase in food products observed between May and June 2022 was mainly “Oil and Fat” 2.7%, “Milk, Cheese and Egg” 2.1%, “Mineral Waters, Soft Drinks, Fruit Juices and Vegetables” 0.8%. and “coffee, tea and cocoa” with 0.4%.

For non-food items, this increase is mainly related to the price of “fuels” of 9.2%. Prices at the pump are actually even higher: a liter of diesel sells for 15.80 DH, compared to 17 DH for petrol.

On fuel, the government still refuses to waive or suspend taxes to support motorists, as many countries around the world (France, Germany, Italy, Spain, etc.) have done.

This assistance is given to road smugglers: 4th assistance amount is further increased by 40%. And this is a cumulative envelope of 1.4 billion dirhams so far for road transport professionals. This does not prevent households from losing purchasing power.

Inflation is still high in Morocco

At least two essential factors are helping to keep inflation levels high in the Kingdom in the coming months:

– Tensions in the oil market will continue due to sanctions against Russia and insufficient increase in production of OPEC member countries. According to the World Bank, crude oil prices should reach nearly $100/b in 2022 and 2023, a 50% increase compared to 2021.

-Overall, rising prices of energy commodities lead to rising prices of other basic commodities.

-Disruption of production and supply chains can affect food availability and the incomes and livelihoods of vulnerable populations.

“Imported inflation should reach exceptional levels this year, as in most countries in the world, which will suddenly affect purchasing power and weigh on the profitability of some manufacturing sectors”, notes the HCP in particular. Who estimates that inflation will rise to 3.2% in 2021, 0.1% in 2020 and nearly 4.9% in 2022. Ultimately, household purchasing power will decline by 1.5% in 2022 instead of 1.1% average growth between 2015 and 2019.

In its latest monitoring report on Morocco’s economic situation, made public on July 20, the World Bank made the same observation, although it expects inflation to remain high in 2022. According to the firm, “Even with the reduction in subsidies, consumer price inflation is expected to increase from just 1.4% in 2021 to 5.3% this year.

Poor clink glasses

All countries suffer from high levels of inflation, with disparate impacts that ultimately affect billions of people. UNCTAD, the United Nations Trade and Development Organization, estimates that billions of people face the biggest cost-of-living crisis in a generation due to rising food and energy prices. And the most vulnerable consumers are in dire straits.

UNCTAD analysis shows that a 10% increase in food prices reduces the income of poor households by 5%, equivalent to what these households typically spend on health care.

This international environment requires governments to make delicate trade-offs: control inflation by raising interest rates or preserve growth by trying to keep the economic engine running smoothly. For now, Morocco has opted for the second option, with the central bank deciding not to raise its key rate and keep it unchanged to support the recovery.

F. Uriagli