Will the Red Sea tensions affect Morocco's economy?

Fears in Morocco of rising inflation if the Red Sea crisis continues (Al Jazeera)

There is debate in Morocco about whether or not there are repercussions of the Red Sea crisis on the country's economy, at a time when the Kingdom is suffering from economic challenges related to drought and the slowdown in the global economy.

Since mid-November 2023, the southern Red Sea region, specifically the Bab al-Mandab Strait, has been facing attacks launched by the Houthi group on ships linked to Israel, which later expanded to include American and British ships, in support of Palestine.

Business owners and professionals in Morocco fear the possible repercussions of the Red Sea tensions on energy prices in the country, and their impact on prices in general, especially since the country imports more than 90% of its energy needs.

Return of inflation

Morocco, like many countries, fears that inflation will rise again if the crisis lasts for a long time, especially since many ships have begun to take the Cape of Good Hope route, located south of South Africa, as an alternative route to the Bab al-Mandab Strait and the Red Sea.

This fear comes after a Moroccan parliamentarian raised the issue of the arrest of a company specialized in supplying, distributing and selling fuel, which has a 12-year contract with Morocco, with all its shipments via the Red Sea indefinitely.

Sudden crisis

Moroccan economist Omar Kettani says that the Red Sea tensions will affect his country’s economy in the short term, which requires the Kingdom to search for alternatives to avoid the continuation of this impact.

The Houthis target cargo ships owned or operated by Israeli companies or transporting goods to and from Israel (French)

In a statement to Anadolu Agency, Al-Kattani - a professor of economics at Mohammed V University in Rabat (governmental) - indicated that the impact will be on the level of rise in the prices of ship shipments.

He explained that the country is required to search for alternatives in order to secure its needs of goods at reasonable prices, based on other corridors, especially since the country imports many products from China that pass through this corridor.

China is a major source of goods sold in Moroccan markets, in addition to energy derivatives coming from countries in the Middle East, all of which pass through the Red Sea.

Regarding Morocco’s energy imports, the expert explained that his country is required to continue strengthening renewable energies, given the difficulty of controlling what is happening at the international level in this sector.

Al-Kattani believes that the country cannot control what is happening in the Red Sea, which makes it required to develop a program that includes an expectation of potential dangers within the next 10 or 15 years, and based on it build alternatives and strategies.

He called on his country to diversify its trade partners, and said, “It is necessary to build ports on the coast of Morocco on the Atlantic Ocean, especially in the south of the country, while strengthening the country’s partnerships with African countries, to be a receiving or passing station for ships.”

In turn, Moroccan parliamentarian Fatima Zahra Bata warned her country's government that the country's energy sector would be affected by the tension in the Red Sea.

This came, according to a question directed by the parliamentarian from the parliamentary bloc

of a party

in the House of Representatives, to the Minister of Energy Transition, Leila Benali.

The parliamentarian drew attention to the suspension of a company specialized in supplying, distributing and selling fuel (which it did not specify), all of its shipments through the Red Sea indefinitely.

She promised that this company has a contract with Morocco for a period of 12 years. While the decision means that the company will take the Cape of Good Hope route to reach its final destinations, which will result in an increase in the cost of supply.

It called on the government to reveal the extent of the impact of the tension in the Red Sea on the local fuel market, and on supply and distribution chains and selling prices in Morocco.

There was no comment from the Moroccan government on the repercussions of the tensions on the economy, until Tuesday morning.

The crisis is limited

For his part, Madih Wadi, a Moroccan economist, believes that the Red Sea tensions have no repercussions on the country currently in terms of price increases.

In a statement to Anatolia, Wadi - who is also the head of the Moroccan Association for Consumer Protection (non-governmental) - said that current indicators show that the rise in prices is not affected by the increasing costs of maritime transport, due to the tensions in the Red Sea.

He explained that these developments do not currently affect the consumer in his country, especially at the level of basic materials. Fuel prices fell last January, and continued to decline this February.

He warned that the rise in prices of some consumer products in his country is not due to the Red Sea tensions, but rather to other reasons. Such as: speculators and brokers.

He continued, "There may be an upward impact on prices if tension continues for more months in the Red Sea region, especially for imports coming from the Bab al-Mandab Strait."

Last week, the World Bank said that the assumption that tensions in the Red Sea will continue during the coming March and April may cause a crisis in supply chains, as occurred during the Corona pandemic.

The US and British armed forces carried out joint attacks against targets in areas controlled by the Houthis in Yemen. (Reuters)

The bank added, "Shipping rates from Asia to Europe increased three-fold to nearly $3,000 per 40-foot container, from the lowest rate recorded in 2023."

Tensions in the Red Sea have entered a significant escalation phase since the Houthis, on January 9, directly targeted an American ship, after they were targeting, within the framework of solidarity with the Gaza Strip, cargo ships owned or operated by Israeli companies, or transporting goods to and from Israel.

Last January, the White House announced, in a joint statement from 10 countries, that in response to Houthi attacks against commercial ships in the Red Sea, the US and British armed forces carried out joint attacks against targets in areas controlled by the Houthis in Yemen.

In solidarity with the Gaza Strip, which since October 7, 2023, has been exposed to a devastating Israeli war with American support, the Houthis are targeting, with missiles and drones, cargo ships in the Red Sea owned or operated by Israeli companies, or transporting goods to and from Israel, which later expanded to target American and British ships.

Source: Anadolu Agency