- The BCT
At the beginning of its works, the Board reviewed recent data on the evolution of the international economic situation, with the growth forecasts published by the O.EC.D, showing an ongoing recovery of the world economy at a moderate pace but also a sluggish growth in the Euro zone where the situation requires undertaking of new measures to boost domestic demand and the economic activity as a whole.
At the national level, the Board examined the latest economic indicators available, reflecting sound performance of the agricultural sector’s activity with an oil season that seems promising following good performance of the cereal season (80% increase in the crop) and this concurrently with tourist receipts improvement in August and September. However, industrial production tightening went on in the first half of the current year mainly in line with a drop in non-manufacturing industries’ production, in particular the energy sector.
In this context, the latest forecasts account for a downward review in the expected economic growth rate for 2014 as a whole, between 2.3% and 2.4% compared to 2.8% as per previous forecasts, while this rate would reach 3% next year.
As for the external sector, the Board noted an ongoing slippage of the current balance deficit (+34.8% or 1,412 MTD) which reached 5,470 MTD over the first eight months of 2014, representing 6.6% of GDP, against 5.3% over the same period of 2013 due to the continuing increase in the trade balance (+22.7% at end August 2014) going beyond 9.4 billion dinars, following a drop in exports (-0.6%) and an increase in imports (+6.2%). Besides, the Board focused particularly on the ongoing worsening in the deficit of the balance of energy (up by 71%) which reached, over the first eight months of the current year, the same level recorded during 2013 as a whole , contributing thus to more than 60% widening in the global trade deficit. On another level, mobilizing of significant external financing helped to maintain a comfortable level of foreign currency reserves: 12,524 MTD or the equivalent of 110 days of imports on 26 September 2014, compared to 103 days over the same date of 2013.
As for trend in inflation, the Board noted certain detente of trend in prices, over August 2014, when inflation came to 5.8% in annual shift against 6% in the previous month, in line with slower pace of manufactured products and food product prices. This helped to offset the effect of service prices faster pace. This same trend concerned core inflation (excluding fresh and controlled products prices) with a rate regressing to 5.8% against 6.2% in July.
As for the banking sector, the Board observed the firming up of the pace of the outstanding balance of deposits in the first eight months of the current year (7% against 3.7% a year earlier), which concerned mainly forward deposits and to a lesser degree sight deposits. Similarly, financing to the economy recorded the same trend over the same period (7.1% vs. 4.1%), mainly for short term loans.
As for monetary evolution, the Board noted an ongoing decrease of banks’ needs in liquidity over September 2014, for the third month in a row, leading to a drop in the global volume of BCT intervention to 4,644 MTD in daily average, up to 26 of the month, (4,293 MTD on 26 September) compared to 5,142 MTD last August. The average interest rate on the money market posted a virtual stagnation: 4.93% over the same period, against 4.94% a month before.
As for the foreign exchange rate, the Board observed an appreciation of the dinar against the euro in September, coming to 2.2826 dinars for 1 euro on 26 of the month, up by 0.5%. However, the dinar depreciated by 3.1% against the dollar on the same date, coming to 1.7944 dinar. Compared with the beginning of the year, the dinar depreciated by 0.7% against the euro and by 8.2% against the dollar on 26 September.
In considering these evolutions, the Board insists, once again on the seriousness of risks that weigh on global financial balances mainly at the level of the external sector, shown through the ongoing worsening of the trade deficit, mainly with the drop in exports which may become more pronounced over the forthcoming months notably in line with possible slowdown of recovery in the Euro Zone. Hence, practical measures to rationalize imports are urgently needed according to the Board who decided to keep unchanged the key interest rate of the Central Bank of Tunisia.
(For more data on the economic and financial situation, please refer to the Central Bank of Tunisia website: www.bct.gov.tn).