1.9% is the estimate of the High Commission for Planning (HCP) with regard to the loss of household purchasing power in 2022. A figure that appeared in the latest report of the HCP’s 2023 provisional budget. According to the authors of the report, this data reflects the difference between, on the one hand, the increase in gross household disposable income (+4.5%) and, on the other hand, the level of inflation that Morocco is experiencing (6. 4%)* like the rest of the world. A shock particularly felt in 2022 following the war in Ukraine.
Deteriorating standard of living since 2019
For Zakaria El Faiz, economist at the HCP and contributor to the report, “this differential makes it possible to calculate from the aggregates of the national accounts, the purchasing power of households defined as the quantity of goods and services that a household can buy today with their income compared to what he might buy a year ago”.
From there, according to the economist, this decline in the standard of living of Moroccans is not only due to the increase in price levels. It can also be viewed from the point of view of gross disposable income. The decline is therefore also linked to the difficulties of Moroccan companies since the Covid pandemic involving more unemployment and difficulties in accessing employment and therefore to income in an inflationary context. “These are second-order effects that affect the gross disposable income of households, doubly penalized by the economic difficulties and the increase in consumer prices,” says El Faiz.
For him, the weakness of Moroccan growth (1.3% in 2022 once morest 7.9% in 2021) limited the increase in household disposable income to 4.5% in 2022 once morest 9.2% in 2021. This disposable income has been entirely swallowed up by the level of price increases which reached 6.4% in 2022, mechanically causing a drop in purchasing power.
The HCP has returned on several occasions to the deterioration of the standard of living of Moroccans. Thus, in addition to the report on the 2023 provisional budget, another study, released last October, estimates that the standard of living of Moroccans has deteriorated by a total of 7.2% at the national level, between 2019 and 2022.
This decline affected the most vulnerable low-income households who have seen their standard of living drop by 8% over the same period. Intermediate households saw their standard of living fall by 6.6%, while the wealthiest households experienced a 7.5% drop in their standard of living. As a result, according to HCP figures, 3.2 million additional people fell into poverty or vulnerability between 2019 and 2022 by the combined effects of the pandemic crisis and inflation.
Endogenous inflation Vs exogenous
However, insists El Faiz, “it is not just the consequence of price increases. The evolution of prices is a data imposed by a contexte international. But action to improve income can be an important lever to reduce the consequences and preserve purchasing power”.
This assertion comes from the conviction within the HCP that the origin of inflation is still exogenous. A substantiated analysis in the periodic publication of the department of Ahmed Lahlimi, The Briefs of the Planpublished on January 25 under the title Evolution of inflation of tradable and non-tradable products in Morocco.
The author of the article Mohamed El Maliki, Head of the Statistical Indices Division at the Statistics Department within the HCP thus asserts that “the observed inflation is governed by the structure of production costs generated by the successive rise in the price of oil and imported products. This phenomenon has had a psychological effect on most products and services”.
And to conclude further: “The analysis of inflation according to this exchangeability criterion shows the strong contribution of tradable products of around 79.9% to observed inflation. Thus, inflation in 2022 is caused by factors of external origin following supply chain imbalances following the Covid-19 pandemic. This increase was accentuated by the effect of the Russian-Ukrainian conflict and the increase in inflation among our main economic partners”.
Lower prices at all costs
A point of view that is not entirely shared at the government level. According to a high-level source, “we have no objective elements to determine to what extent this criterion of exchangeability is relevant in defining the origin of inflation in Morocco. What we observe, however, is that for the past few months, inflation has not only been exogenous but also endogenous. It affects the real economy through the rise in the prices of raw materials and transport, which have repercussions on the price of products produced by national companies. It is no longer just a psychological repercussion but also the integration of increases in inputs on production costs and prices, in particular of everyday consumer products”.
And to add, “the action of the government has largely contributed to curbing the effects of inflation and limiting it to 6.6% instead of 9.6%. Through fiscal policy, 40 billion dirhams were distributed in particular in subsidies and compensation. Today that inflation has been “endogenized”, the action of the Central Bank, which seeks in fine lower demand, will tend to limit inflation even more. This year is regarding finding a good policy-mix between monetary and fiscal policy for even greater results on price stability and therefore on the standard of living of households”.
In short, one should not rely too much on the growth as leverage to improve the standard of living, but on the contrary on a limitation of demand in order above all to lower prices. The bets have been made.
This is an estimate of headline inflation in 2022, not just consumer price inflation. The latter amounted to 6.6% (source HCP, final figure).
