Morocco’s Inflation Moderates as Government Unveils $62 Billion Budget

In September 2023, Morocco’s annual inflation rate saw a slight decline to 4.9% from the previous month’s 5%. This decrease can primarily be attributed to the ongoing reduction in food inflation, which reached a 16-month low at 10.1%, down from 10.6% in August. Transportation costs also decreased to 0.5% from 1.8%, contributing to the overall slowdown. Furthermore, there was a deceleration in prices of clothing and footwear, which dropped to 2.9% from 3%. Similarly, furnishings, household equipment, and routine household maintenance declined to 2.7% from 3%. The inflation for restaurants and hotels eased by 50 basis points to 5.4%, while inflation remained steady for housing and utilities (at 1%) and health (at 0.7%).

The core inflation rate, which excludes volatile items, stood at 4.9% in September, the lowest since April of the previous year, following a prior increase of 5.4%. On a monthly basis, consumer prices rose by 0.8%, compared to a 0.3% gain in August.

Meanwhile, Morocco’s finance ministry has submitted a draft budget for 2024 to the parliament, totaling 638 billion dirhams ($62 billion), marking a 6.3% increase from the previous year. The draft budget emphasizes post-earthquake reconstruction, the expansion of social safety nets, health and education reforms, and investment promotion.

The government has maintained the country’s growth forecast at 3.7% for 2024, the same as the expected rate for the current year (3.4%). Additionally, it anticipates a reduction in the fiscal deficit to 4% of GDP in 2024, down from the 4.5% expected for this year, despite increased spending on social services and reconstruction efforts.

Morocco has pledged to invest $12 billion over the next five years to rebuild homes and upgrade infrastructure in areas affected by a 6.8 magnitude earthquake that claimed nearly 3,000 lives.

The government will begin distributing monthly aid of 2,500 dirhams ($250) this month to approximately 60,000 households affected by the earthquake, primarily in the High Atlas mountains. Finance Minister Nadia Fettah Alaoui confirmed this initiative to parliament members.

Fettah Alaoui also highlighted the need for an upgrade of the health sector to support the universal health insurance program. The government has allocated $3.1 billion for this purpose next year.

Last week, Morocco’s housing ministry announced financial aid to help lower and middle-income families access housing. In response to ongoing drought conditions, Morocco has allocated $1.8 billion for investments in waterways, dams, and desalination plants.

The 2024 budget earmarks a record 335 billion dirhams ($32.5 billion) for public investments, reflecting an increase of 11.6%. The government expects inflation to ease to 2.4% next year, down from the 6% projected for the current year.

Additionally, the 2024 budget includes 16.357 billion dirhams ($1.6 billion) to control the prices of sugar, cooking gas, and soft wheat next year. Finance Minister Fettah Alaoui stated that needy individuals will start receiving direct cash handouts of at least 500 dirhams per month by the end of the year.