Bank Al-Maghrib continues its war against inflation
Another increase in the Bank Al-Maghrib key rate. The first monetary policy meeting held on Tuesday March 21 resulted in a 50 point increase basic at 3% . The business community was expecting it and speculation focused mainly on the level of the increase.
Going into debt will become more expensive for all economic actors, which should translate into a reduction in demand for goods and services, and subsequently in prices. This is the «classic» scenario. In any case, the central bank is tightening its policy and sticking to its main mission: to curb inflation by leaving the government with the delicate task of supporting purchasing power, a power impacted by the recent rises in food prices, and this, even if measures have been taken by the Government. Moreover, the Board of Bank Al-Maghrib considers that “despite a relative easing of external pressures, recent data show that inflation continues to pick up, driven in particular by internal supply shocks on certain food products”. With the new key rate hike, the central bank wants to further anchor inflation expectations and ensure the conditions for a rapid return to levels in line with the price stability objective. Being more or less aggressive, Bank Al-Maghrib seeks to prevent the triggering of self-sustaining inflationary spirals.
Last year, inflation recorded its highest level since 1992, namely 6.6%. It will take several months before a return to a sustainable situation. In the short and medium term, the decline in inflation has been ruled out: « it should remain at high levels in the medium term, should stand in 2023 at 5.5% on average, and its underlying component would be 6.2% ”. In other words, the central bank has revised its forecast upwards by 2 percentage points due to the surge in the prices of certain food products. For the Bank, the shocks causing this increase would gradually fade in the second half following the various measures taken by the government. In 2024, the scheduled start of the removal of the subsidies for some basic products should keep inflation overall at a high level of 3.9%.
Low level of growth
Concerning the issue of growth , the forecasts of the Central Bank (BAM) are less optimistic than those of the Government. The Central Bank expects a rate of 2.6% versus 1.2% in 2022. This low level of growth is explained by an increase limited to 1.6% of the agricultural value added after its 15% drop in 2022 and by a reduction to 2.7% in the value added of non-agricultural activities under the effect of the deterioration of the external environment.
The agricultural season benefited from the last rains but the production of the three main cereals should be limited by the size of the areas sown. These areas are said to not having exceeded 3.65 million hectares according to the Central Bank citing the Department of Agriculture. In addition, non-cereal crops would suffer from restrictions on irrigation water and from the high cost of inputs. Bank Al-Maghrib is thus counting on a cereal harvest which would not exceed 55 million quintals while according to the Government, this harvest should reach 75 million. It will be necessary to wait until 2024 for a return to an average production and an added value of 6.9%. Moreover, a slight acceleration in growth to 3.5% is expected next year.
2.8%, the current account deficit
The current account deficit would stand at 2.8% of GDP versus 3.9% in 2022 before dropping to 2.6% next year. The pace of exports is expected to slow to 3% from 29.4% last year. Central bank experts expect sales of the automotive sector to rise by 7% per year and those of phosphates and derivatives to decline. This decline in the price of phosphates is said to be due mainly to the fall in the price of crude phosphate which should drop from 266 dollars per ton in 2022 to 200 dollars in 2023 and to 175 dollars in 2024 and from 772 dollars per ton to 750 dollars then to 650 dollars respectively for diammonium phosphate (DAP).
Imports should also decline by 2.3% this year before increasing by 0.8% in 2024. A decline in the energy bill is expected.
Khadija MASMOUDI
