Morocco slashes inflation f'cast on delay in subsidy

By Souhail Karam
RABAT (Reuters) – The Moroccan government has revised down its 2012 inflation forecast to 1.5 percent from a budgeted 2.5 percent in part due to a slower pace in an expected dismantling of subsidies on food and energy products, a finance ministry source said on Thursday.
The source was quoting the inflation forecast figures from a statement read out by Finance and Economy Minister Nizar Baraka before parliament on Thursday. The minister did not explain to parliament the downward revision, but the source told Reuters:
“It is partly due to a delay in the planned reform of subsidies”.
Earlier this week, the finance ministry’s studies department said growth in domestic household demand, a key engine of growth in Morocco, would slow to 2.3 percent in 2012 from the 7.4 percent increase it recorded in 2011.
Baraka maintained however his department’s forecast for an economic growth of 3.4 percent in 2012.
Morocco’s inflation, as measured by consumer price inflation, almost doubled to an annual 1.9 percent in June from its level a month earlier, after the government imposed a sharp hike in fuel prices to tame spending on subsidies.
The June 2 rise in fuel prices, the sharpest in decades, was a first step towards a reform of subsidies system that aims to reduce their burden on public finances, ensure a fairer distribtion of state resources while it provides poorer Moroccans with direct compensation from the state for the dismantling of the subsidies.
Morocco spent the equivalent of 6 percent of the country’s$100 billion gross domestic product (GDP) in 2011 on subsidising staples, mostly wheat and sugar, as well as energy products, to hold down inflation.

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