Press release of the BCT Executive Board meeting held 25 June 2014

At the beginning of its works, the Board examined recent trends in the international environment and reviewed notably the latest data on the world economic growth published by the World Bank during the current month. In fact, an  acceleration of the world economic growth is expected to reach 2.8% over the current year, and 3.4% over the next year, thanks to a recovery at the level of developed countries, while growth would remain below expectations in the developing countries which must, according to the Bank recommendations, start up the structural reforms needed. Besides, the Board noted the recent increase in the international prices of oil which reached 114 dollars the barrel after a period of standstill at less than 110 dollars and this, in line with geopolitical tensions; this would intensify pressure on the financial balances of the country.

In the same way, on the national level the Board examined the World Bank latest forecasts for economic growth in Tunisia, which reveal signs of a positive evolution of the national environment as shown through the higher level of economic growth compared to forecasts of January 2014, up from 2.5% to 2.7% for the current year and from 3.3% to 3.5% pour 2015 compared to 2.8% and 3.5% in forecasts respectively for the IMF and 2.3% achieved in 2013.

At the sectoral level, and thanks to the favourable weather conditions that marked the current agricultural season, the cereal crop would reach 24.5 million quintals compared to previous forecasts of 22 million, and 13 million achieved in the previous season. Yet, for the industrial sector, production index recorded a drop in March 2014 (-0.8% in annual shift), under the effect of  production tightening both in manufacturing industries and non-manufacturing ones and this concurrently with a drop in most advanced indicators of the  activity in the sector in  May of the same year. Besides, and concerning the services sector, the main indicators of tourist activity posted a drop in May 2014 compared to the same month of last year, while air transport recovered significantly.

As for the external sector, the Board expressed again its worries about the ongoing worsening of the current deficit which reached 4.6% of GDP over the first five months of 2014 compared to 3.9% over the same period of 2013, mainly in the wake of an ongoing deteriorated deficit in foreign trade, notably for energy and foodstuff, despite a slight tightening in the imports of the latter. This led, along with a drop in foreign investment inflows, to persisting pressure on net assets in foreign currency which regressed to 10,555 MTD or the equivalent of 94 days of import, on 24 June of the current year, compared to 106 days at the end of 2013.

As for trend in prices, the Board expressed his worries with respect to signs of resurgence of inflationary tensions after a certain period of detente. In fact consumer price general index continued to increase in May 2014 for the second month in a row, reaching 5.4% in annual shift compared to 5.2% in the previous month, due to faster price rise for foodstuff, manufactured products and services.

However, when analyzing trends in the banking sector activity, the Board noted  a better progress pace at the level of deposits over the first five months of 2014 (2.7% vs. 1.2% over the same period of 2013), along with a faster evolution  in financing to the economy over the same period (3.8% vs. 3% a year earlier).

As for the latest monetary evolutions, the Board noted an increase in banks’ needs for liquidity at a faster pace in June 2014, leading to Central Bank intervention with 5.6 billion dinars on daily average to fine tune liquidity, up to 24 June, compared to 5.3 billion last May. Concurrently, the average interest rate on the money market came to 4.73%, over the same period, compared to 4.70% a month before.

On the foreign exchange market, the Board underlined depreciation of the value of the dinar, over current June, against the euro and the US dollar with exchange rates reaching 2.2805 dinars and 1.6654 dinar on 23 of the same month  (-2.4% and -1.9% respectively). Compared to the beginning of the year, the value of the dinar went down by 1.1% against the euro and by 0.6% against the dollar. Thus, the downward trend in the dinar exchange rate over the last months had absorbed the appreciation of the value of the dinar recorded over the first quarter of 2014.

In the light of these evolutions, the Board recalled increasing risk on internal and external financial balances with an ongoing deterioration of the external sector situation which might worsen further over the forthcoming months concurrently with return back of inflationary pressure due to several factors of which the increase in labour costs and the drop in productivity, further to the upward tendency in imported product prices. Besides, the Board called all stakeholders to take their responsibilities and to contribute to efforts targeting recovery in the pace of the economic activity and reduction of financial imbalances. In the same way, and to contain the effect of increasing inflation and its impact on deterioration of the citizens’ purchasing power, the Board decided to increase by 25 basis points the key interest rate of the Central Bank, bringing it to 4.75%.   

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