Inflation will remain high through H1 2023 before beginning to ease in H2
B2Cs should expect high price sensitivity and demand volatility through H2 2023 as Moroccan consumers reel from unprecedented inflation, double-digit unemployment, and record-low household confidence. One silver lining, however, will be the gradual recovery of the tourism and hospitality sector; arrivals in the first half of 2022 were nearly equal to total arrivals in 2021, and more recovery is expected in 2023 and 2024. Businesses will see their margins pressured by higher input costs and challenges in passing on cost increases to a more price-sensitive client base. Additionally, after a strong 2021, the dirham will continue its depreciation trend into 2023, and MNCs should assess the implications of a weaker exchange rate on their operating environment.
Overview
- The cost of living has increased sharply in Morocco in 2022, with inflation crossing the 5% YOY mark in March and climbing to 7.7% YOY in July.
- Morocco has witnessed intermittent social unrest throughout the year, with the most recent round caused by an air traffic controllers’ strike and a planned strike by the transportation unions.
- Social unrest has mainly focused on surging in food and transport prices, with some protesters demanding the government subsidize fuel costs.
Our View
Morocco’s private sector will continue to grapple with high inflation in the coming 12 months, worsened by a severely weakened harvest due to drought and reduced demand for Moroccan exports due to a slowdown in the EU. Morocco’s exposure to global commodity price volatility led to consumer and producer prices surging to record levels in 2022. The cost-of-living crisis fueled social unrest, protests, and calls for government resignations. The government reshuffled some ministries and will likely be forced to postpone some IMF-mandated reforms related to its debt burden, in a bid to curb social unrest; however, living costs are unlikely to ease markedly before H2 2023.
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