The question deserves to be asked and it has just been asked by the economists of the Centre Marocain de Conjoncture: is the cycle of stagflation back? All the ingredients leading to such a situation are present: sluggish growth and rising inflation. Two elements that have a negative impact on household consumption. In any case, the first quarter was marked by a sharp deterioration in household morale.
The confidence index recorded its lowest level since the beginning of the survey in 2008. The decline in growth and the strong uncertainties concerning the evolution of the price of raw materials as well as the pressure on the supply could affect business investment and, by extension, employment. Salvation would come from a good mix of monetary and budgetary policies to avoid a worsening of the situation. As the CMC explains, economic activity is still struggling to regain the growth momentum that is used to prevail before the crisis. The agricultural sector alone could be the cause of a drop of 3 points in GDP growth, but the other production sectors could hardly benefit from subsidies due to the slowdown in demand and rising costs. In any case, the Government has revised growth forecasts downwards: between 1.5% and 1.7% in 2022, instead of an increase of 3.2%, as provided for by the Appropriations Bill.
The reduced growth is accompanied by a rise in prices. The inflationary surge started with the recovery at the end of 2021. It continues to increase under the effect of the crisis in Ukraine. In March, the consumer price index (CPI) increased by 5.3% compared to the same period last year and by 1.8% compared to February. Over a quarter, it increased by 4%. Core inflation, which excludes products at volatile prices and products with public prices, increased by 3.9% in March. “The suddenness of the price surge and its fairly general nature affecting raw materials, food products and energy at the same time testify to a greater exposure to risks likely to considerably weaken the policies pursued to support activity”, notes the CMC, adding “the climate of uncertainty which hovers over the world economy with the rise of risks in a highly inflationary context should have an almost mechanical impact through trade flows on the situation in Morocco”. CMC economists call for the urgent implementation of restructuring programs to deal with the vulnerabilities of the national economy in order to put it back on more sustained growth paths which are less dependent on climate hazards.
Khadija MASMOUDI
