Economic Analysis - Tightening Cycle To Start In 2017 - MAR 2017

BMI View: Inflation will accelerate in Morocco in 2017, fue lled by rising energy and food prices, although the uptick will be short-lived. Combined with higher GDP growth and US rising interest rates, Bank al-Maghrib will start its hiking cycle in 2017, which will present limited risks for economic activity and credit demand in the country.

We expect inflationary pressures to accelerate in Morocco in 2017, amid rising energy and food prices. Food and drink, rent and utilities and transport altogether account for more than 70% of the consumer price index (CPI) basket. Combined with the removal of subsidies over the past two years, which are unlikely to be reintroduced amid the ongoing fiscal consolidation drive, we believe that inflation movements will remain heavily dependent on international commodity prices. With our expectations for Brent prices to increase by more than 25% in 2017 and for cereal prices to rise, we forecast inflation to accelerate in 2017, averaging 3.0% throughout the year.

The transport component severely mitigated inflationary pressures in 2016, with growth averaging -0.3% y-o-y over January-November 2016. Following movements in Brent prices, the transport component returned to positive growth in September 2016, and we expect this trend to continue throughout 2017. Nonetheless, we caution that the uptick in inflation will be short-lived, as prices increases in commodities moderate from 2018.

Accelerating Inflation In 2017
Morocco - CPI By Component, % chg y-o-y
Source: Haut Commissariat au Plan, BMI

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