Morocco's inflation rate stabilises and should plunge below 2 % in 2024

According to the “2024 exploratory economic budget” report by the High Commission for Planning (HCP) published at the beginning of July, inflation in Morocco should stabilise in 2024, rising by 1.8 % instead of 2.8 % in 2023. This fall would enable Rabat to return below the recommended 2 % threshold. 

The HCP's report sets Morocco's national inflation trend against the backdrop of a global economy that is not very dynamic in the short term, and which is expected to slow to 2.7 % in 2023 before slowly recovering to around 2.9 % in 2024. This projection is explained in particular by “the deployment of rigorous monetary policy measures aimed at curbing inflation, which should result in a deterioration in the confidence of economic agents, impacting investment and ultimately growth”. 

At national level, the rate of growth in consumer prices for the second quarter of 2023 is expected to have decelerated slightly for the first time in six consecutive quarters of continuous increase. It remains high, however, rising at a rate of 7.1 % year-on-year, compared to a 9.1 % increase in the previous quarter.

According to Marocco World News, this turnaround is due to a significant fall in non-food prices of more than 50 %. Non-food products are expected to grow at a rate of 1.4 %, compared to an increase of 3.5 % in the first quarter. Food prices are also expected to grow at a slower pace in the second quarter of 2023, from 17 to 15 %.

At a press conference, the Minister Delegate for Relations with Parliament, Mustafa Baitas, pointed out that the fluctuation in inflation rates is influenced by inflationary pressures resulting from the war in Ukraine, particularly in the cereals sector. According to the Minister, the inflation rate nevertheless remains tightly controlled by the government and continues to fall steadily, while noting a significant increase in foreign investment and remittances from Moroccans living abroad. 

In recent months, Rabat has introduced a series of economic measures to improve the performance of the national economy and promote its recovery. The Minister Delegate in charge of the Budget, Fouzi Lekjaa, pointed out that the national economy is maintaining its stability thanks to the policies adopted, despite the persistently difficult international situation. In particular, they are helping to strengthen the confidence of the international financial community, a key factor in mobilising low-cost financing and attracting foreign direct investment (FDI). 

According to Lekjaa, this confidence was reflected in Morocco's removal from the Financial Action Task Force's (FATF) “grey list” last February, as well as its remarkable exit from the international financial market in March 2023. All this has enabled Rabat to benefit from a flexible credit line of five billion dollars from the International Monetary Fund (IMF) in April 2023, according to Hespress. 

According to the HCP, Morocco's close dependence on external markets for inputs and raw materials, particularly those of a strategic nature, is an obstacle to a stable positive contribution from external demand to economic growth. Nevertheless, the increase in domestic demand should create a favourable climate for Morocco's national economic growth. It should make a positive contribution to GDP growth in Morocco in 2024, amounting to 3.1 % percentage points.

This recovery in domestic demand is particularly due to the increase in household consumption, which should rise by 1.6 %, contributing one percentage point to economic growth. Other factors, such as the improvement in farm incomes, the sustained rise in external transfers, the better agricultural season and the fall in demand for live animals, all of which have helped to reduce Rabat's dependence on imports. 

However, the HCP stresses that the risks of a deterioration in the outlook remain high due to the uncertainty surrounding developments in the war in Ukraine and its global repercussions. According to the experts, the tensions in the financial sector could amplify and create a contagion phenomenon that would weaken the real economy.