Rising fuel prices raise inflation concerns in Morocco

Renewed increases in fuel prices are raising concerns about inflation in Morocco, as global oil market tensions linked to conflicts involving Iran, Israel and the United States continue to drive up energy costs.

Economists say the link between fuel prices and domestic inflation remains strong, warning that continued increases could translate into higher costs for consumers and businesses in the coming months.

Economist Youssef Keraoui El Filali said rising fuel prices are likely to have an immediate effect on everyday goods, particularly food and basic commodities.

“Higher fuel prices will directly impact consumer and food products,” he said, noting that recent increases in diesel prices, by about two dirhams per liter, are expected to push up transportation costs and, in turn, retail prices.

While government support has been directed at transport professionals, El Filali said it does not directly improve household purchasing power.

He also warned that if global oil prices continue to rise, Morocco could face a new wave of inflation, potentially leading to stagflation, a combination of slowing economic growth and rising prices, similar to the period during the Russia-Ukraine War.

Another economist, Anas Radi, said the relationship between fuel prices and inflation is clear but does not necessarily imply an immediate surge.

“We are not yet facing a strong and confirmed return of inflation, but there is a clear pressure channel that could push inflation higher if oil prices continue to rise globally,” he said.

Radi explained that fuel costs affect the entire pricing chain, from transportation to production and distribution, meaning increases are gradually passed on to consumers, especially for transported goods and food products.

Morocco’s dependence on imported energy makes it particularly sensitive to external shocks, economists said. The liberalization of fuel prices in 2015 has also accelerated the transmission of global price fluctuations to the domestic market.

Radi pointed to concerns over insufficient strategic fuel reserves, noting that recent price increases occurred shortly after regional tensions escalated, suggesting limited buffering capacity within the system.

Beyond consumer prices, rising energy costs could also weigh on Morocco’s broader economic indicators, including growth and the external balance.

According to projections by Bank Al-Maghrib, the current account deficit could widen to around 3.1% of GDP in 2026, largely due to higher energy import costs.

The central bank has also signaled that inflation could gradually increase through 2026 and 2027 if oil prices remain elevated.

Economists warn that prolonged external shocks could leave Morocco facing a difficult economic equation, higher import costs, pressure on businesses, and declining household purchasing power, underscoring the broader risks of sustained energy price hikes on the national economy.