Faced with the rise in world prices, particularly for oil, gas and foodstuffs, the Moroccan economy is being put to the test.
Still recovered from Covid-19, the Moroccan national economy is evolving in a high-risk context marked by pressures on public finances, an agricultural season threatened by drought while its economy is very dependent on the agricultural sector – the main contributor to the GDP, up 14% – and a sharp rise in the prices of raw materials and energy. “The combined effect of higher oil and grain prices, if sustained, could cost Morocco between 1% and 2% of national income this year,” warned the Moroccan think tank Policy Center for the New South.(PCNS) in a study published at the end of February. On the ground, social discontent is rumbling, a few weeks before Ramadan, Moroccans are beginning to voice their dissatisfaction with the high cost of living across the country. “All the conditions are met for the emergence of a real popular discontent which would represent a real threat to the social stability of the country”, worries the press, in particular, the daily Akhbar Al Youm in its edition of March 2. A direct allusion to the crisis of 2007-2008, when the sharp rise in the prices of food raw materials triggered food riots in various cities around the world. Prices had peaked in 2010-2011, a period coinciding with the onset of the Arab Spring.
Morocco less impacted than its neighbors on wheat
As elsewhere in the world, the Moroccan executive has had to manage for several months the inflation of the prices of raw materials which has hitherto been part of a context of the resumption of the Covid-19 epidemic, and this, while the agricultural season was hampered by low rainfall. Added to this are now the consequences of the Russian invasion of Ukraine. Particularly oriented towards the Black Sea for their wheat imports, African countries of the North are worried, everyone fears an extension of the Russian offensive in Ukraine. However, the situation is slightly different for Morocco, as the kingdom is less dependent on Ukrainian and Russian cereals. Only about 20% of Moroccan wheat imports come from the Black Sea, while the remaining 80% are imported from other countries, notably France. The Ministry of Agriculture wants to be particularly reassuring with regard to supply on the local market, the country having an official five-month stock, in addition to a reserve available from farmers.
Prices on world markets scrutinized
But if the risk of stock shortages seems to have been ruled out for the moment, the record prices reached in recent days on the world markets threaten to explode supply costs. “Monetary authorities will need to carefully monitor the pass-through of higher international prices to domestic inflation, in order to calibrate appropriate responses,” the IMF recommended this week. Mobilized on this issue, the government announced subsidies for flour and suspended wheat customs duties. Emergency measures that intervene in the context of drought force the country to import more. The country has a severe rainfall deficit: to date, the national average rainfall has reached 75 mm, a deficit of two-thirds compared to a normal season, detailed the royal cabinet. On February 16, King Mohammed VI ordered the emergency release of 10 billion dirhams (936 million euros), with the aim of mitigating the devastating effects of the drought on agriculture and the rural world. Among the battery of measures is the establishment of “drought insurance”. The price factor is, therefore, a major issue for Morocco, which is also faced with a rise in the prices of fertilizers and inputs and especially fuels.
Do on a tight budget
In Casablanca, the economic megalopolis, the liter of unleaded gasoline is around 13 dirhams (1.21 euro), and that of diesel (diesel) exceeds 11 dirhams (1.02 euro), record levels. And social unrest is mounting. Moroccan road haulers are on strike these days. “We are extending the strike because our demands have not been answered by the government,” Mounir Benazouz, secretary-general of the National Union of Road Transport Professionals, affiliated to the Democratic Confederation of Labor (CDT), told AFP. one of the main trade union centers in Morocco. Strikers demand a cap on fuel prices and profit margins for hydrocarbon distributors since the surge in prices at the pump, accentuated by the Russian invasion of Ukraine. A sixth union has since joined the movement earlier in the week on Tuesday, followed by 75% of freight carriers, according to Benazouz. Taxis are also affected by the strike but to a lesser degree. In response, Transport Minister Mohamed Abdeljalil promised “to present the fuel price cap to the government and to respond to us in ten days”, a trade union leader, Moulay Ahmed Filali, told the Arabic-language newspaper, Al Alam, on Wednesday.. The liberal government of Aziz Akhannouch – which built its fortune on the distribution of hydrocarbons – has been particularly criticized for several weeks for its inaction in the face of rising social discontent. “As unions urge authorities to adjust wages to offset rising prices, price inflation looks even higher,” concludes Policy Center for the New South. As of Thursday, February 24, the price of Brent oil exceeded the fateful bar of 100 dollars ($103.02). However, in the 2022 finance law, the Moroccan government has counted on a barrel of oil at 80 dollars. This is what Morocco has to do with limited financial resources and has a large budget deficit – estimated at 6.5% of GDP this year – and trade. At the same time, a rise in the price of natural gas is also to be feared for the coming months. Morocco is now a net importer following the closure of the Maghreb Europe Gas Pipeline.
