Cost of living crisis in Morocco constitutes most significant domestic economic threat in next two years, says WEF

In its 2023 edition, the Global Risk Report of the World Economic Forum (WEF) has released the results of a survey of 1,200 experts and decision-makers, revealing that the global economic risk of successive crises will inevitably increase risk for countries such as Morocco.

The results indicate that the living costs crisis caused by inflation in the midst of post COVID-19 economic recovery has been exacerbated by the war in Ukraine, with these factors constituting the main risk factor that states will face in the next two years.

The report, prepared in cooperation with Marsh McLennan Company, an institution specializing in risk management consulting, and Zurich Insurance Company, listed the the risks facing Morocco.

On a scale of one to five, “cost of living crisis” comes first. It is followed by “rapid and/or continuing inflation” in second place, and “risks arising from violent shocks to commodity prices” in third place.

Risks resulting from “severe commodity supply crises” come fourth in Morocco, followed by risks from “debt crises” in fifth place. In Morocco, the report notes that major risks fall mainly into the societal category, followed by economic and environmental risks.

In addition to the domestic challenges facing the country, regional concerns in the Middle East and North Africa (MENA) region are also looming, as MENA countries diverge in some of their respective economic trials and tribulations.

MENA, the Arab world share common risks that differ in severity

In the Maghreb, Algeria faces rapid and/or sustained inflation first, followed by the cost of living crisis, numerical inequality, geopolitical contestation of resources, and then inter-state conflict.

Tunisia is experiencing first the challenge of the debt crisis, followed by the collapse of the state, severe commodity supply crises, the cost of living crisis, and rapid and/or sustained inflation.

In the Grand Arab region, data from Libya and Mauritania do not allow for accurate projections, says the WEF, but overall data from the Middle East indicate the recurrent nature of these risks in several countries.

In Egypt in particular, people will mainly face a significant debt crisis, rapid and/or sustained inflation, a high cost of living crisis, prolonged economic stagnation, and severe commodity price shocks.

Positive risk mitigation options 

The report notes some positive points, particularly in terms of investment in critical metals and mineral reserves. The output highlights that a number of developing and emerging markets “have become net beneficiaries” of increased public and private sector interest, including Indonesia, Morocco, Bolivia, Argentina and Chile.

“However, these countries have had to walk a tightrope as global powers exert control through trade, investment, and technology linkages and seek to restrict access by competing states,” the report notes.

Along with increased nationalization, this trend “led to the relatively recent creation of OMEC, an organization of mineral-exporting countries similar to OPEC.”

While the resource boom has “paved the way for growth for some of these countries, for others, the focus on these assets has created a phenomenon leading to increased corruption, inequality, violence and humanitarian crises,” the same source adds.

On a global scale, the Forum warned that geopolitical disputes could lead to increased economic pressures and exacerbate these risks in other countries.

In a global dimension, the report warns that the cost of living is the primary risk over the next two years. This factor causes “strong tensions in several regions of the world, while plunging millions of people into extreme poverty and feeding societal tensions,” warned the WEF.

The dimension of this risk “exceeds that of natural disasters and violent weather events, or even conflicts,” said the same source, recommending the implementation of “urgent global cooperation measures, to create rapid and reduced-circuit action paths.

These initiatives are even more urgent, especially as the effects of the global pandemic are still being felt, in addition, the war between Russia and Ukraine is having an impact on key economic sectors, according to the WEF.