Morocco sees first deflation in years during unrest

Consumer prices take unexpected dip as anti-establishment protests weigh on investment and dampen demand

Consumer prices in Morocco fell year on year in April for the first time in years as the biggest anti-establishment protests to rock the North African country in decades weighed on investment and dampened demand.
In April, the annual inflation rate was -0.3 per cent and -1.1 per cent month-on-month, led down mainly by food, telecommunications, leisure and transportation costs, data from the state planning authority (HCP) showed.
HCP gave no explanation for the declines.
"This (April) was the first time that we recorded a deflation in several years," an official from the finance ministry's economic analysis unit told Reuters.
The index recorded a rate of 2 per cent annual inflation in February and 0.6 per cent in March.
Underlying inflation, used by the central bank to set benchmark interest rates and excluding volatile prices and state tariffs, edged up to 1.4 per cent in April compared with the same month in 2010. It stood at -0.1 per cent month on month, HCP said.
Neither the finance ministry nor HCP responded to emailed requests for comments on the country's overall economic environment amid persistent protests that started in February.
The Entrepreneurship Observatory (www.ode.ma), of blue-chip BMCE Bank, said liquidity in the market has been tight because investment growth of the past few years outpaced the growth in savings which are increasingly focused on real estate rather than financial instruments.
Protesters, led by the February 20 Movement, demand that King Mohammed's political and economic clout be reduced, that the judiciary be made independent from both the royal court and the government and that business be made more transparent.
In March, the king promised constitutional reform to grant more power to the elected government and to make the judiciary more independent.
The government has initiated a multi-billion dirham spending spree in a bid to appease public sentiment but it has not stopped a series of strikes and protests that have hurt an economy reliant on agriculture and tourism.
In one sign of the slowdown, the growth rates of imports and exports each fell by about one percentage point over the January-April period compared to the January-March period.
Tourism receipts, a main source of foreign currency for a country whose currency is not convertible, rose by an annual 3.9 per cent in January-April period, almost half their annual growth during the first quarter.
A survey conducted by the central bank showed that 54 per cent of 400 polled industrial firms said production declined in April versus 23 per cent who said it increased.
The constitutional reform will be submitted to the king for approval next montn before it a referendum is held in July, to be later followed by parliamentary elections before October.