Rabat – The World Bank (WB) recently reported that higher inflation and the surge in the prices of non-subsidized goods such as fuel would cause a 1.1-1.7% increase in poverty in Morocco.
The international bank warned Morocco that its poor fiscal state was due to the introduction of regressive subsidies which favor the rich.
WB added that such subsidies would widen inequalities across Morocco, leading to an increase in the Gini index from 39.5 to 39.7. The Gini coefficient measures wealth inequality within a country.
To monitor the real-time impact of rising prices in Morocco along with other countries in the MENA region, the bank issued web surveys distributed over the Facebook platform.
In the case of Morocco, 879 out of 2,031 surveyees fully responded to the form.
The participants indicated that cereals, fuel, transport, and fresh vegetables were the goods and services “most affected by price rises” in the North African country.
They added that middle-class households suffered the most from the increase in fuel and transport costs, while urban areas were more heavily impacted by the increase in prices compared to rural areas. Rural areas, however, were more heavily affected by the rising cereal prices, the bank argued in its data analysis.
The trends seen in Morocco over the past months extend to the entire region of the Middle East and North Africa (MENA), with the World Bank predicting that an increase in food prices would push 23 million people in MENA into poverty, reversing years of poverty reduction progress.
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The bank added that “for every 1% increase in MENA food prices, nearly half a million additional people could be living in poverty in the region.”
The alarming statistics reflect the serious impact of the war in Ukraine in exacerbating “existing inflationary pressures in the region related to drought, conflict, and other issues.” In 2021, inflation reached 14.8% in MENA, up from the prior average of 7.3% recorded between 2000 and 2018.
Recent data show higher inflation rates across the region, estimated at 43% in Iran, 154% in Lebanon, and 30% in Yemen.
In Morocco, data from the central bank, Bank Al-Maghrib, have shown that inflation is set at an average annual rate of 4.7%, more than double the recommended average of 2%.
As inflationary pressure is expected to reach an average of 5.3% this year, the Moroccan bank has maintained interest rates at 1.5%, ignoring international recommendations to increase rates.
In late June, the bank said that inflation would likely drop in 2023 to reach an annual average of 2%.
38% of Morocco’s budget is currently allocated to food and non-alcoholic beverages, while transport constitutes 10% of expenditures. Housing, water, electricity, gas, and other fuels, however, have the second largest budget share estimated at 15%.
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