High prices and inflation levels threaten social stability

Rachid Aouraz, co-founder of the Moroccan Institute for Policy Analysis, highlighted how historically high levels of inflation and prices have affected social stability.

In an analysis published by the Middle East Institute (MEI), Oraz said that Morocco, like the United States and Europe, has witnessed a recent rise in inflation rates, reaching 6.4 percent in July 2022, in a clear reference to the so-called “imported inflation”.

Oraz added: “The government views this developing situation with great apprehension, especially as Morocco managed to avoid the runaway inflation that plagued much of the Middle East and North Africa over the last decade. Thanks to its sound monetary policy, Morocco was able to keep inflation to a minimum, but the situation has now changed and it seems that the internal monetary policy is unable to address the external factors that led to the recent increase.

He added that Bank Al-Maghrib continued to forecast a higher inflation rate than the government expected, as it stated after its meeting in June that it expected annual inflation to reach 5 percent. But while the US Federal Reserve raised interest rates to curb inflation, Morocco’s central bank did not do the same, instead keeping rates steady, because Morocco is facing imported inflation and rising rates will hamper private investment and create more unemployment.

According to the same economist, “the Moroccan government is facing a difficult situation, in which high inflation is accompanied by a simultaneous slowdown in economic growth.” In March, Bank Al-Maghrib forecast a 0.7 percent growth rate for 2022, before revising its estimate in June to around 1 percent, a sharp drop from 7.9 percent growth in 2021.

Oraz commented: “The inflation rate and the growth rate are inverse values, which means that when inflation rises, economic growth decreases, endangering social stability.”

He explained that Morocco has benefited from relative stability over the last two decades thanks to a strong monetary policy that kept domestic inflation rates below 2 percent in most years, noting that this monetary policy also helped maintain the relative political and social stability of Morocco during the period of social upheavals in most of the Middle East and North Africa. This success has given the current Governor of Bank Al-Maghrib, Abdellatif Jouahri, a reputation for stability, compared to his peers in the region, many of whose countries have been hit by massive waves of inflation, considering that “the approach Conservative has kept him in charge of the central bank for a long time.

“In the past, high prices caused catastrophic social unrest in Morocco that were outside the control of the state,” Aouraz said. On May 29, 1981, when Jouahri was Minister of Finance, bloody protests broke out calling the victims (martyrs of bread), especially in Casablanca, after the government raised the prices of basic foods such as flour, sugar, oil, milk. and butter The protests were just one of several cases in which inflation has put social stability at risk.”

He continued: “During the last two decades, despite relatively low inflation rates compared to the 1980s and 1990s, some waves of inflation have shaken social stability. Morocco witnessed three major waves of protest: the February 20 protests, the Rif and Jerada protests, and the economic boycott campaign, all linked to high prices and inflation, although each has its own context.

He added: “As each rise in inflation eventually led to an escalation of protests, Morocco has learned the importance of dealing with inflation effectively.”

“In 2022, rallies were held to commemorate the protests of February 20 and condemn the high prices, in an apparent repetition of history, but this time other factors were also playing in the increase in inflation: the drought in Morocco, the effects of COVID -19, and Russia’s war against Ukraine,” said Oraz, which has also caused a sharp rise in energy prices as a wave of inflation in advanced economies.

And he added: The Covid-19 crisis has led, together with the stagnation of the annual levels of GDP per capita during the last decade, to the “exhaustion of the Moroccan middle and working classes, and has especially affected workers in the sector. informal, which represents 30 percent of GDP.” and 70 percent of employment in the country,” he concluded, concluding that “inflation under these conditions imposes a heavy burden on families and businesses, and can undermine social stability, if recent or distant history is anything to go by. what to happen”. .”

The economic researcher stressed that “the government has a narrow window to address the problem of inflation before things get worse. While Morocco may appear stable, history suggests this will not last and the mood on the streets could change quickly.”