Omar Bakkou: We tend to oversize inflation in Morocco

Inflationary pressure is not generalized, but rather imported. In any case, this is what Omar Bakkou, economist and specialist in the politics of change, thinks with conviction, guest of the program “L’Info en Face” of the Le Matin Group. As for the decisions taken by the government and the Central Bank to deal with it, they are, for the most part, adequate and sound, according to the expert who has some reservations about the methods of implementing some of these solutions. The details.

How to read the current inflationary situation? Omar Bakkou, economist and specialist in the policy of change, guest of the program “L’Info en Face” of the Group “Le Matin”, wants to put his development in Morocco into perspective. “We tend to oversize this phenomenon in Morocco. Because we are not on a hyperinflation, but lower than the levels observed in the countries of the Mediterranean”.
This inflation is, of course, very visible on the ground, but it was to be expected, according to our expert. The reform of the Compensation Fund and the handover of the hydrocarbons market were put in place with a view to making the consumer bear the energy bill. “This is the case today,” underlines Bakkou. Moreover, according to the economist, if raw materials have experienced a significant increase, other products have, on the contrary, recorded considerable declines. “You have to put all that into an equation,” says Bakkou.
What about this impression that the government is struggling to find effective solutions to curb this inflationary movement or, at least, slow it down? “There are two aspects that must be distinguished: that of the general approach in terms of adjustment policies and the methods of implementation,” Bakkou nuances. For the first part, that of the general approach, the solutions adopted by the government are, in the opinion of the economist, the best that can be adopted, knowing that, he underlines, the State has a minimum of leeway given its state of indebtedness, which far exceeds the conventional threshold of 60% of GDP. These solutions mean that the cost of inflation is borne mainly by the middle and wealthy class (infinitely less important) to avoid the state having to bear it, in which case the consequences would be disastrous, he believes. This translates into a drop in the consumption of this middle class and, consequently, produces a slowdown in economic growth. Regarding the second part, that of the methods of implementing the solutions adopted by the government, it was necessary, according to Bakkou, to take charge of all this through good governance, including the energy transition.

A general discontent around fuel prices, but consumption on the rise

Paradoxically, despite the general discontent, fuel consumption rose again during the second quarter, while fuel prices have never been so high. But is this a sign that demand cannot be controlled? Isn’t this increase in demand fueling the surge in these prices? Yes, respond to the invitation from “l’Info en Face”. The aim of the reform was, among other things, to have a positive impact on change reserves. Or, the figures on foreign trade used that the energy bill does not drop. “This problem is linked to the rationality of the consumer and the energy transition”, insists Bakkou. Today, the objective of the reform has not been achieved. In fact, underlines the expert, part of the shock of the pandemic and the current shock is borne by fiscal policy, another by monetary policy and a final part borne by the consumer. “This diversification of adjustment levers is healthy in my opinion,” Bakkou discovered. What about the Central Bank’s decision to keep the key rate limited to 1.5%? “A decision, somewhere, inevitable”, answers our expert. Such decisions have a medium and long term impact. They should therefore not be changed regularly in order to give them time to take effect, he notes. The same goes for central bank credit, in particular, and monetary policy in general, he points out. Moreover, “if Bank Al-Maghrib has decided so it is because it considers that Morocco is still in an exceptional period”, adds Bakkou. The status quo will probably be maintained even at the start of the school year, predicts Bakkou. Regarding fiscal policy, is it in the government’s interest to reduce its investments? It is important not to touch it, to warn the invitation of “L’Info en Face”, to fight against this inflation. In addition, he believes that if the State had a dashboard of hydrocarbon imports and their international purchase prices and their sale in Morocco, this could help to lessen the effect of inflation. seen.

Flexibility of the dirham: no widening of the floating band on the horizon

Regarding the widening of the floating band, “I have shown in the past that it is an inappropriate decision given the economic configuration of Morocco”, notes the economist. We took this decision in relation to the fact that a depreciation of the exchange rate would be a lever for adjusting the Balance of Payments and damaged that we would spend less on estimates, particularly in the face of a shock like the one we are currently experiencing, indicates he. Bakkou believes that Morocco is one of the few countries to have a strong currency, which it has preserved since independence. This strength was obtained thanks to the stability of internal prices, but also thanks to that of exchange rates, he notes. Be careful, however, he warns, not to maintain a dirham that is too strong to remain competitive with other countries. Anyway, our expert thinks that there will be no widening of the floating band in the next few months.




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