The new forecasts leave the previous projections (dated June 2024) broadly unchanged. According to the BCT’s latest Economic Outlook for October 2024, they point to ‘a continuation of the gradual disinflationary trend, with inflation remaining at relatively high levels in the short and medium term’.
According to the same official text, “the disinflationary path would be maintained in the short term by the transmission of the effects of the previous falls in international commodity prices and the maintenance of the freeze in administered prices, which dominate in the consumer basket”.
However, the BCT analysts tempered this optimism about the easing of inflation in Tunisia, adding that “upward pressures will be active over the forecast horizon, linked in particular to the rise in wage costs, the upward outlook for the international prices of several products and commodities, the persistent water stress and the resilience of demand”.
A first forecast of 5.1% for 2025, but with a price freeze!
According to the latest forecasts, inflation will continue to decelerate, reaching around 6.5% (year-on-year) by the end of 2024 and 5.1% by the end of 2025. On an annual average, the inflation rate should fall from the 7% estimated for the whole of 2024 to 5.8% in 2025, after peaking at 9.3% in 2023′, says the BCT, which for the first time dares to anticipate the figures of the INS (National Institute of Statistics).
And still in their convoluted language, which sometimes tries to make the figures say more than they usually can bear, the BCT analysts state that “the recent slowdown in inflation of products at administered prices should continue over the forecast horizon.
On an annual average, the inflation rate for products at administered prices is expected to fall from 5.9% in 2023 to 3.8% in 2024 and then to 2.7% in 2025′.
They then go on to say that ‘in the case of fresh food, the latest projections have revised upwards the previous projections for the inflation rate for these products in the short term, against the background of the recent acceleration in the prices of a number of key products’, and finally they repeat that ‘the inflation rate for fresh food is expected to ease gradually, while remaining at historically high levels, given the risks associated with the persistence of unfavorable weather conditions’.
And then they change their tune again, bringing out the annual average, which allows them to qualify their forecast and say, without too much risk of alarming the public and raising expectations, that “fresh food inflation should gradually decline from an all-time high of 16.2% in 2023 to 11% in 2024 and then to 8% in 2025 (compared with an all-time average of 5%)”.
The balance between reality and realism
According to the BCT’s Economic Outlook for October 2024, ‘the outlook remains particularly sensitive to developments in international commodity and raw material prices, wage costs, the fiscal policy strategy for reforming the subsidy system, the speed of the energy transition and developments in the country’s water situation’.
The more realistic analysts at the BCT rightly believe that “stronger and more persistent inflationary pressures than assumed in the central scenario (i.e. inflation at least stabilizing) would push inflation up and increase the risks of drift”.
In particular, they cite “adverse climatic changes around the world and/or a worsening of geopolitical tensions, which could accelerate the rise in international commodity prices. Also, the accentuation of adverse climatic risks at the national level, which would further reduce production and market supply capacities and increase the risks of a further rise in fresh food inflation’.
Secondly, as novices who still believe in the possibility of economic policy changes other than those of a social nature, they mention “the delay in implementing reforms to increase the potential and productive capacity of state-owned enterprises, which would contribute to the deterioration of supply conditions and the amplification of inflationary pressures”.
Based on what has actually happened in Tunisia in recent years, they added that “greater pressure on the current account, particularly from a widening trade deficit, could amplify external inflationary pressures”, not forgetting that “persistent problems in distribution channels (shortages, speculation, etc.), the recurrence of supply shocks and excessive margin behavior would add further uncertainty to inflation forecasts”.
And so, it is all these uncertainties that, in our view, undermine the case for stabilization, let alone a fall in inflation. Let’s hope we’re wrong!
