- The BCT
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In the beginning of its works, the Board reviewed the main recent trends in the international environment that was marked by display of preliminary results for growth over the first quarter of the current year. These data show in particular better growth pace in the Euro Zone and confirmed emergence from recession concurrently with maintaining of accommodating monetary policies by the main Central Banks to boost the world economy’s recovery.
At the national level, and when examining the latest trends in the national environment, the Board noted a slower economic growth in the first quarter of the current year (2.2% in annual shift compared to 2.7% in the same period of last year). As per the National Statistics Institute’s latest data, this deceleration hit most of the sectors, exclusive of agriculture and non market activities. The Board noted also maintaining of the unemployment rate at a high level, over the same period, particularly among university graduates.
On another level, the last sectoral indicators available foreshadow a positive agricultural season in the wake of favourable weather conditions. Thus, a notable evolution of cereal crop (up by more than 60%) is expected to reach some 22 million quintals over the current season. Industrial production grew slightly in February 2014, while the key indicators of activity in this sector (trends in exports and imports of raw materials, semi-finished products and capital goods) regressed slightly in April 2014. However, there was a certain improvement at the level of services activity during April, notably in tourism.
As for the external sector, the Board noticed an ongoing widening of the current deficit over the first four months of the current year, coming to 3.8% of GDP against 2.6% in the same period of 2013 and this in line with an ongoing deterioration of foreign trade deficit mainly following worsening of food and energy balance (some 40% of the global deficit with contribution of some 77% to the deficit widening). This situation, along with FDI tightening and despite drawings on external loans, brought about a drop in net assets in foreign currency which came to 10,615 MTD or the equivalent of 95 days of imports, on 27 May 2014 compared to 11,602 MTD and 106 days at the end of 2013.
Trend in prices accelerated somehow in April 2014. Thus, the inflation rate came to 5.2% in terms of annual shift compared to 5% in the previous month. This trend is attributable, mainly, to acceleration in the prices of foodstuff, manufactured products and services. This same trend concerned core inflation with 6.3% increase in prices, exclusive of fresh and controlled products, in April 2014 compared to 6.1% a month earlier.
Concerning the last monetary trends, the Board noted an increasing need of banks liquidity in May 2014, leading to high intervention by the Central Bank to adjust the money market with 5,297 MTD on daily average, up to the 27th of the month, against 5,259 MTD at the end of the previous month. The average interest rate on this market dropped slightly to 4.70%, over the same period, against 4.72% last April.
As for the evolution of the banking sector activity, the Board underlined the increase in the progress pace of the outstanding balance of deposits over the first four months of the current year (2.6% against 2% last year), following mainly a recovery in the outstanding balance of forward accounts (3.7% vs.-9.5%), while financing to the economy recorded, over the same period, a virtual stagnation in their progress pace (2.6% vs. 2.5%).
When examining recent trends in transactions on the foreign exchange market, the Board noted the dinar depreciation over the current month (-2% against the dollar and -0.1% against the euro), with the exchange rate reaching, on 26 May, 1.6317 dinar and 2.2247 dinars, respectively. Yet, the dinar exchange rate remains slightly in appreciation compared to the beginning of 2014.
In the light of these evolutions, the Board focused, as in its previous meetings, on the depth of the problem tied to macro-economic balances, mainly at the level of the external sector and public finances and called to fasten undertaking of urgent measures to curb deterioration of these balances and guide efforts and national resources towards the promotion of investment and production sectors and decided to keep unchanged the key rate of the Central Bank of Tunisia.