Press release of the BCT Executive Board meeting held 30 April 2014

While considering, in the beginning of its works, recent trends in the international economic situation, the Board reviewed the latest updates regarding the growth rates disclosed by the International Monetary Fund over the current month. These demonstrate an ongoing recovery of economic activity, over this year, notably in industrialized countries thanks to maintaining of accommodating monetary policies targeting growth recovery.

When analyzing main economic, monetary and financial data at the national level, the Board noted positive trends related to the agricultural sector, notably with an abundant supply especially in key products, which is likely to moderate trends in prices. On the other hand, the Board noticed negative trends in other sectors, particularly the drop in industrial production over December 2013 (-0.3% in annual shift) and the decrease in most advanced indicators of the sector’s activity in March 2014, besides the decline in main tourism indicators over the same month (-0.4% for overall bednights and -13.6% for tourist entries), in line with the air transport activity’s slower growth pace.

As for the external sector, the Board noted the ongoing current deficit worsening over the first quarter of the current year, posting 2.7% of GDP against 1.8% for the same period of 2013, in line with the unprecedented trade deficit widening due notably to pressure related to the energy balance and food balance imports which, alone, account for 43% of the overall deficit. This trend meant a lower level of net foreign currency assets coming to the equivalent of 97 days of imports on 29 April of the current year, against 102 days on the same date of 2013.

Concerning trends in inflation, the consumer price index pace eased up in March 2014, coming to 5%, in annual shift, against 5.5% over the previous month and 6.5% for the same month of the previous year, in the wake of core inflation moderate trend (excluding prices of controlled and fresh products).

At the level of monetary trends, the Board noted the ongoing increase in banks’ needs for liquidity over April 2014. Thus, the Central Bank volume of interventions to fine tune the money market was brought to about 4,688 MTD at the end of last March. The interest rate on this market posted, hence 4.73%, over the same period, against 4.72% over March.

Concerning the banking sector activity, the Board highlighted the slower growth pace of deposits over the first quarter of this year (1.9% against 2.6% a year earlier), in line with the outstanding balance of savings accounts’ slowdown and the certificates of deposits’ decrease. The same trend concerned financing of the economy which went up by 1.1% over the same period, against 1.9% a year earlier, owing to the drop in short-term loans and the virtual stagnation of medium and long-term loans.

As for the latest trends on the foreign exchange market, the Board pointed out the slight depreciation of the dinar’s value against the main foreign currencies over the current month while remaining high compared to the beginning of the year. The dinar  foreign exchange rate posted, on 28 April of the current year, 1.5965 dinar for a US dollar (+3.1%) and 2.2071 dinars for a euro (+2.7%).

Considering these trends, the Board reiterated its concern about recent trends in the trade deficit focusing on the imperative need to undertake the required urgent measures to curb the trade deficit slippage which constitutes henceforth a threat to the external sector balance. It calls, in this respect, to combine everyone’s efforts to strive for imports rationalization by setting priorities, on the one hand and giving impetus to exports in favour of better foreign demand outlook, on the other hand and decided to keep unchanged the Central Bank key interest rate.

Likewise, the Board estimates that launching preparatory works with a view to holding the National Economic Conference constitutes a favourable opportunity for all economic, social and political actors’ effective contribution to work together to identify urgent responses to the imminent challenges faced up by the national economy and lay the bases of a development model that reflects the country’s economic and social aspirations.

(For more data on the economic and financial situation, please refer to the Central Bank of Tunisia website ).