Retro 2022 - Inflation, an economic impact exacerbated by the Russian-Ukrainian conflict

Cereals, fertilizers, fuels, foodstuffs… The conflict in Ukraine has multiplied, since its outbreak in February 2022, the inflationary dynamics already shaken by the pandemic. The year 2022 has been made even harder for the world economy, and therefore for that of Morocco, which depends almost entirely on imports of these products.

The year 2022 certainly did not start with the best of mears. It was an exceptional year with the advent of the war between Ukraine and Russia from the 2nd month, which, in addition to the humanitarian crisis and the loss of life, destabilized the balance of the world economy which was recovering at barely its normal course after two years of struggle following the repercussions of Covid-19.

This conflict, which seems to be a long-term one, has created a real obstacle for global economic growth in 2022, given that Russia and Ukraine have a relatively considerable weight in terms of production. The two countries are the world’s main suppliers of basic foodstuffs, minerals and essential energy products, which, after the interruption of deliveries of these materials, generated an economic shock of significant magnitude, in particular at the level commodity markets, where the prices of oil, gas and wheat have soared.

Added to this is the impact on industry and manufacturing, intensified by the difficulty in sourcing metallurgical raw materials such as iron and steel, as well as wood, coal and minerals. It turned out that Ukraine was unable to export 70% of its products due to the destruction of its industrial production infrastructure and the blocking of seaports. The war also had repercussions on technological advancement since Ukraine was one of the largest producers of neon.

The economic devastation caused by the Russo-Ukrainian war almost disrupted all the prices of products internationally, including in Morocco, thus affecting the purchasing power of citizens who demonstrated in several countries, either against the high cost of life, the case of Morocco, or against the shortage of products, the case of France.

For this purpose, MoroccoLatestNews UK asked Pr Abderrazak El Hiri, eTeacher-researcher at the Faculty of Legal, Economic and Social Sciences (FSJES) of the Sidi Mohammed Ben Abdellah University of Fez anddirector of the Interdisciplinary Laboratory for Research in Economics, Finance and Management of Organizations, to dissect the significant impacts on the Moroccan economy in 2022 resulting from the ongoing conflict.

The war between Russia and Ukraine has had an extremely negative impact on both the world economy and the national economy and has created tensions on various markets, particularly those for raw materials such as cereals and energy products. So these tensions have led to considerable price increases for a set of goods that are traded internationally.“, detailed the expert.

He argues in this regard thatin Morocco, and as in all other countries, recorded inflation has never reached this high level since the 1980s. For example, for the month October 2022, inflation was 8.1%, i.e. a level which represents almost 5 times the moderate level observed since the beginning of the 2000s“.

As such, Pr El Hiri situates inflation on several levels which he details by indicating that ” the first level is the deterioration of purchasing power with its effects on aggregate demand and on the possibility of economic growth, knowing that a deterioration in purchasing power has negative effects on consumption and also on investment..

” The second level, he continuesis an inflation whose effects are felt at the level of competitiveness while the tThe third level represents an inflation that has led to the deterioration of the balance, of the trade balance. For example, for the period from January to October 2022, compared to the same period in 2021, the trade deficit increased from 166.7 billion dirhams to more than 260.8 billion dirhams, an increase of more than of 94 billion dirhams, which represents a worsening of the external balance of more than 56%“.

It thus connects the qfourth stage to inflation that has impacted the standard of living of 3.2 million additional people who have fallen into poverty or vulnerability, according to the HCP. This is a social impact.

For the specialist, the last level relates to the upward revision of the key rate. ” The monetary authorities were forced to raise the key rate by 50 basis points in an attempt to curb inflation and bring it back to the level deemed moderate. It is true that the public authorities in Morocco have taken a series of measures to preserve the purchasing power of households, among which are the subsidies granted to the National Office for Water and Electricity, those granted to transport professionals in addition to the subsidies enjoyed by a set of goods such as sugar, flour, soft wheat and loot gas“, he says.

Pr El Hiri said that inflation requires additional efforts from public authorities through the promotion of competition but also through price control.

This is an opportunity to initiate a real policy aimed at replacing imports with local production, but also to be able to achieve national sovereignty over a set of goods consumed by households in terms of food, industry and health.“, concludes the expert.

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