MNow that inflation has become a proven macroeconomic risk, the nature of its character is increasingly debated. Initially presented as a temporary phenomenon, the rise in prices should take hold over time.
In several world economies, evidence of strong and lasting inflation has been evident since the start of the year. Proof of this change is the attitude of most central banks, which have reversed their monetary policy by now integrating the sustainable nature of current inflation.
Latest decisions: those of the US Federal Reserve (Fed), which raised its key rates by three quarters of a point, the largest increase since 1994.
The institution even says that we must expect other increases of the same order in the months to come to fight against galloping inflation. Same story with the ECB, which announced a series of rate hikes from July, with an initial hike of 25 bps. A first for more than a decade. The guardians of the Euro have also significantly raised their inflation forecast until 2024. The ECB now expects inflation of 6.8% in 2022, which should then slow to 3.5% in 2023, then to 2.1% (even above the 2% target) in 2024.
Change of perception
In Morocco, the Central Bank and the majority of analysts believe that this phenomenon is transitory. Even if some pressures are more structural, the level of inflation should return to normal in 2023. This optimistic scenario in which inflation would return to less than 2% in 2023 (according to BAM projections) is however far from ensured, as disruptions to global supply chains could persist beyond 2022.
Lower energy prices, with a war in Ukraine bogged down, meanwhile, is not certain. On the ground, economic operators are already beginning to integrate these more structural aspects of inflation into their investment logic. Ahmed El Yacoubi, Chairman of the Management Board of Société Générale Maroc, explained during his last media outing that“a number of operators are beginning to install inflation as a structural element. In any case, as an item that will last longer. Now, in terms of investment, they are starting to model their projects on the basis of this inflation which can last”.
The CEO of the bank, François Marchal, agreed, saying that“After a wait-and-see period, operators have moved into a logic where inflation is well established. They have started a cycle of price increases to be able to maintain their margins and continue to operate in the current international environment, with an increase in all raw materials for all sectors.. For their part, CDG Capital analysts maintain that inflation could ease in the coming months, as it could also spread more widely in the economic fabric if the rise in prices continues to settle permanently at the international level. .
Imported inflation until 2024?
According to the World Bank, the impact on food and energy prices from the war in Ukraine is expected to last several years. In the Commodity Markets Outlook report, the bank estimates that “prices will remain at historically high levels until the end of 2024”. For energy prices alone, the bank expects an increase of more than 50% this year, before a drop in 2023 and 2024. As for those of non-energy goods, such as agricultural products and metals, they should increase by almost 20% in 2022, then also decrease in the following years. However, commodity prices are expected to remain well above the average of the past five years, and in the event of a prolonged war or new sanctions against Russia, they could become even higher and more volatile than currently expected. alert the WB.
What feed more inflation imported by Morocco, which is eroding corporate margins and household savings. Structural or cyclical then? This legitimate question related to inflation is of interest to everyone. If the consensus in Morocco agrees to estimate that the rise in prices recorded so far is only a “hump” and that it should deflate this year, new elements in the international environment are beginning to invalidate this assumption. To be continued.