Inflation in Morocco falls by half a point in the second quarter

Activity is accelerating in the second quarter of 2024 after a slow start to the year marked by a decline in industrial production. 

Morocco's low inflation is largely due to the country's economic structure, which is based on a steadily growing manufacturing economy. Inflation has been relatively low in recent years, with a consumer price index (CPI) of 0.7% in the second quarter of 2024 according to the High Planning Commission (HCP). 

Compared to its neighbouring countries, this figure is significantly lower than the Organisation for Economic Co-operation and Development (OECD) regional average of 2.5%. 

Compared to neighbouring countries, Morocco's inflation is the best partly due to its monetary policies and the maintenance of interest rates despite price rises. Algeria, with 2.6%, is the country that comes closest to Morocco's figures. Other countries such as Libya, Egypt and Mauritania have rates three times higher than those of Morocco. 

Although inflation is low, the North African nation faces a number of major challenges in order to maintain inflation. In this case it was reduced by lower food prices. However, non-food items saw an increase from 0.9 to 1.5%, although this did not affect overall inflation. 

Some of the food items that saw a reduction in their inflation rate were: fish and seafood with 5.7% inflation, dairy products with 2.1% and oils and fats with 2.0%. The regions where inflation fell the most were Al Hoceima with a decrease of one point and Kenitra with a 0.8 point decrease. 

Despite the fall in food prices, the agricultural and livestock sectors are going through difficult times due to severe droughts. This was particularly noticeable in wheat and barley production, which fell by 44.4 and 51%,respectively.

Morocco's livestock sector showed some resilience in the second quarter of 2024 thanks to government measures to combat the impact of drought and improve vegetation cover caused by late spring rains. In addition, the poultry industry continues to support livestock production: the number of birds sent to slaughter increased by 4 per cent instead of decreasing by 14.9% a year earlier. 

Core inflation, which excludes prices of state-regulated products, was also affected by a 0.3 point decline to 2.2%. On the other side of the coin are the prices of fossil fuel-dependent energies, especially gas. With an increase of 4.2% in this quarter, the price of energy has maintained stable growth. 

However, the recovery of other manufacturing sectors and the strengthening of market services in the second quarter of 2024 will restore the momentum of non-farm activity to the pre-crisis pace (3.7%). The mining, construction and trade sectors will be more dynamic in the second quarter of 2024. 

The value-added that the mining sector is experiencing with increases of more than 15% is being a key driver of productivity growth, as is the demand for agricultural fertilisers, one of the country's most powerful sectors. While fertiliser prices are expected to fall - also in the third quarter - their use will increase especially in Europe and North America.