The Central Bank of Tunisia (BCT)’s 2008 annual report, just released, shows a 14.8-per-cent rise in the volume of investments in 2008, its rate reaching 24.9% of the GDP, thanks to continuity of reforms, particularly the improvement of business climate and encouragement of private initiative and creation of businesses.
The Report, submitted on Friday to President Zine el Abidine Ben Ali by Governor of the Central Bank of Tunisia Taoufik Baccar, indicates that the national economy managed to achieve in the past year a growth rate of 4.6%, thanks to the dynamism of market services, especially in the areas of communications, transport and tourism, while the industrial sector recorded some decelerated pace of growth, particularly in the mechanical and electrical industries, textile, clothing, energy and mining.
Nationally, despite the magnitude of the crisis, 2008 was marked by continued economic activity at a satisfactory pace and the preservation of financial balances.
Given the changing circumstances, the State swiftly implemented, according to the Report, wide-ranging measures to support the enterprises’ financing needs and to help them cope with any difficulties resulting by the crisis.
For its part, the BCT undertook, in support to these temporary measures, to reduce its intervention rate by 75 basic points and introduced new facilities for banks in order to boost the financial market and gather best conditions to support the economic activity of enterprises and individuals.
The foreign direct investments posted a significant increase, their volume rising by 64% in 2008 reaching 3,400 million Tunisian Dinars (MTD). This rise involved most of the sectors, in particular energy, manufactured industries and services.
At the financial level, 2008 was marked by greater control exerted on domestic and foreign balances, despite the pressures resulting from the unstable international situation. Efforts designed to consolidate national savings increased their volume to 11.7 billion dinars, i.e. 23.3% of the GNP, thus contributing to the economy’s adequate financing.
With regard to external payments, trade exchanges grew steadily, partly due to the sharp rise in prices of commodities and a widening of the trade deficit and accordingly of the current deficit which reached 4.2% of the GDP, compared with 2.6% in 2007. This deficit was nevertheless appropriately covered by large flows of foreign direct investments.
The overall balance of payments posted a significant surplus of 2,053 MDT, which helped increase foreign currency reserves that reached 11,656 MDT compared with 9,582 MDT at the end of 2007.
At the monetary level, the interbank market registered, in 2008, a high activity due to the abundance of liquidities mainly originating from the consolidation of foreign currency assets and the significant growth of contributions to the economy by 13.5%. Money supply M3 went up by 14.4% by the end of 2008.
In this context, and in order to control the inflationary pressure, the Central Bank of Tunisia increased, in 2008, twice the rate of required reserve, while ensuring closer monitoring of money market developments and making necessary interventions to regulate liquidity, which helped control inflation gradually.
Meanwhile, efforts continue in order to develop the monetary policy instruments and prepare technical prerequisites needed for the transition to the stage of inflation targeting.
Regarding public finances, the State’s own resources rose by 19.8% in 2008, compared with 6.7% for spending, which brought down the budget deficit to 1.2% of the GDP, compared with 2.9% in 2007, despite the significant rising in expenses of the General Fund of Equalizations and Subsidy of Fuel.
Indeed, reforms of the tax system and streamlining public expenditures allowed to improve noticeably public finance indicators and in particular cutting the debt rate to 47.5% of the GDP against 50% in 2007.
In the area of financing, outstanding support to the economy reached nearly 32.6 billion dinars at the end of 2008, i.e. a rise of 13.5% compared with 2007.
Moreover, banks continued their efforts designed to strengthen their capital base. Thus, their funds amounted to 3.9 billion dinars, registering an increase of 12.6% to bring the risk coverage indicator to 11.7%.
Regarding the portfolio quality of loans, efforts of banks have been strengthened in the area of risk control and in constituting necessary provisions, which helped reduce the rate of classified debts to 15.5% against 17.6% in 2007 and increase the coverage rate of these debts by provisions at 56.8%.
These efforts are reflected positively on the financial results of banks whose net production increased by 13.3% in 2008, thereby enhancing the profitability of their capital to 11.2%.
The domestic monetary market maintained a sustained level of activity and banks continued to finance the economy at a rate faster than the one recorded in the past decade.
Thus, the Tunisian financial market has continued to benefit from the confidence of stakeholders and investors, thanks to the solidity of its foundations and the combination of efforts which averted serious disturbances that hit most of the financial markets.