In its 2023 annual report, the Moroccan Competition Council has attributed the high inflation rates experienced last year to what it describes as “inflationary greed” among some companies. The Council accuses these firms of exploiting their significant market power to increase prices and boost profit margins unreasonably, despite a general decline in external inflationary pressures.
The detailed report, reviewed by Hespress, notes that while inflation in 2022 was largely driven by external supply shocks, such as rising import prices, the inflation observed in 2023 was influenced by different factors. The report highlights a reduction in external inflationary pressures and an easing of persistent inflationary trends at the beginning of 2023.
Impact of Imported Inflation and Climatic Shocks
The Competition Council’s report indicates that the causes of imported inflation have diminished significantly. Imported inflation now only slightly affects prices, with food and fuel being the most volatile components. However, climatic shocks have played a significant role in fluctuating prices for some products, particularly vegetables and fruits.
The report also points to microeconomic shocks, such as the ability of dominant firms to raise prices and benefit from inflation, as a contributing factor. This practice, referred to as “inflationary greed,” is described as firms increasing prices beyond the rise in raw material costs or raising prices of products that have not experienced increased costs. This behavior undermines real competition and is often practiced by large companies controlling market reference prices.
Economist Mohamed Jadri explained that “inflationary greed” occurs when large companies exploit inflation to increase prices and profit margins. This might involve raising the prices of goods and services disproportionately compared to raw material costs or applying unjustified price hikes. “This phenomenon has been observed over the last two years, with many sectors exploiting minor increases in fuel prices to significantly raise consumer prices,” Jadri told Hespress.
Demand-Side and Monetary Observations
The Competition Council’s report also touches on demand-side factors impacting inflation. The slight rebound in household consumption in 2023 presented a risk to inflation control, but consumption levels remained below the threshold of excess demand. The moderate increase in consumption exerted downward pressure on inflation from February 2023. This pressure was further reinforced by rising unemployment and deteriorating purchasing power.
Regarding monetary conditions, the report notes that the downward trend in inflation occurred despite increased credit money circulation. The Bank of Morocco’s data showed a rise in banks’ liquidity needs, prompting the central bank to enhance liquidity injections. The slowdown in household loan growth, due to tighter monetary policy, may have contributed to the observed decline in inflation.
Long-Term Implications for Competition and Inflation
In concluding its analysis, the Competition Council emphasized that robust competition is vital for long-term inflation stability. Effective competition helps stabilize inflation at an optimal level, preventing harm to market functioning. The Council also cautioned against state aid and company agreements that could distort competition and protect profits, urging for measures that ensure competitive neutrality and limit the potential for inflationary practices.
The Competition Council’s findings underline the need for a balanced approach to managing inflation, considering both macroeconomic and microeconomic factors while fostering a competitive market environment.
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