The Executive Board of the Central Bank of Tunisia (BCT) decided at its meeting on Wednesday to keep the BCT’s key rate unchanged at 8%.
In a press release issued at the end of its meeting, the BCT’s Executive Directors considered it necessary to continue supporting the disinflationary process in view of the persistent risks to the path of inflation.
On this occasion, it reviewed the latest economic and financial developments at both international and national levels, as well as the inflation outlook.
Growth is expected to rise. But not BCT’s key rate
Nationally, economic growth was positive but sluggish (1% year-on-year in the second quarter of 2024, compared with 0.3% in the previous quarter), reflecting the underperformance of several key sectors, including construction, mining and energy.
Looking ahead, the Board notes that available economic data point to a continuation of the upward trend in economic growth in the third quarter of 2024, supported by the recovery in external demand and the gradual strengthening of domestic demand.
TND shows resilience, says BCT board
Foreign trade improved in the third quarter of 2024, after a slight slowdown in the previous quarter.
Over the first eight months of 2024 as a whole, the trade deficit (FOB-FOB) remained stable and the surpluses in the services and income balances improved, contributing to the narrowing of the current account deficit (TND 2,130 million compared to TND 3,105 million at end-August 2023). This trend contributed to the consolidation of foreign exchange reserves, which stood at TND 25,654 million (or 116 days of imports) on September 24, 2024.
The dinar’s exchange rate continued to show resilience against the major currencies, helping to reduce external pressures on price formation.
On another front, the gradual deceleration in consumer prices continued, with the inflation rate standing at 6.7% (yoy) in August 2024, down from 7% in the previous month.
BCT’s key rate higher than inflation
The maintenance of inflation at relatively high levels reflects the impact of the continued increase in the prices of a number of fresh food products, such as red meat and fresh vegetables, and the persistence of core inflation ‘excluding fresh food and products at administered prices’.
The latter, which reflects the underlying trend in prices, stabilized at 7% in August 2024, compared with 8.9% in August 2023,” the BCT said. The latest forecasts point to a further gradual easing of inflation, which is expected to average 7% in 2024, compared with 9.3% in 2023.
BCT returns to issue of reforms, which it considers “more than essential”
Core inflation is expected to average around 7.2% in 2024, compared with 9.1% in 2023. The future inflation trajectory remains surrounded by several upside risks in the short and medium term, mainly related to the rise in international commodity and energy prices, water stress, weakening productive capacity and the still difficult situation of public finances.
The BCT Board notes that, despite the resilience shown by the economy in recent years, the implementation of reforms is more than necessary to raise growth potential and restore macroeconomic balances in the medium and long term.
