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Tunisia-BCT: 3% growth this year, decreasing current account deficit and foreign currency reserves at 127 days

At its monthly meeting on April 29, the Executive Board of the Central Bank of Tunisia (BCT) reviewed recent developments in the international economic situation and analyzed the main economic, monetary and financial trends at the domestic level.

It also examined the evolution of the activity of the banking sector, transactions on the money market and the foreign exchange market, and interventions of the Central Bank thereunder.

After deliberation, it decided to keep unchanged the key rate of the Central Bank, said a statement from the BCT.

In a note on the development of the economic and financial conditions, the BCT reported the maintenance by the International Monetary Fund (IMF) of Tunisia’s economic growth rate projected for 2015 to 3%, i.e. the same rate predicted in the updated economic budget, before noting that despite the slowdown in economic growth during the past year, the unemployment rate has dropped slightly in the last quarter of 2014 to 15% against 15.1 % in the previous quarter and 15.3% a year earlier.

The main economic indicators on the development of industrial activity observed during the month of March 2015 show, overall, a decline in exports of major export-oriented sectors, including the textile, clothing, leather and footwear industries (-9.3% in annual shift against -5.6% in March 2014) and mechanical and electrical industries (-0.5% against 2.9%).

In addition, capital goods imports were down (-15.1% against 20.9%) while imports of raw materials and semi-finished products posted a decrease (0.1% against 2%).

Regarding the overall balance of payments, it has posted a surplus of 1,437 MTD in the first quarter of 2015, against a deficit of 434 MTD a year earlier, thanks to the significant consolidation of net inflows of foreign capital in particular in the form of medium and long term loans, coupled with a contraction of the current account deficit.

The current account deficit decreased by 617 MTD in the first quarter of 2015 to 1,416 MTD or 1.6% of GDP against 2,033 MTD and 2.5% during the same period last year, while the balance of trade continued its decline during the same period with 838.4 MTD or 25.5% to 2,451.9 MTD, following the improvement of the food balance (807 MTD) knowing that the energy deficit has kept the same level as a year earlier.

Trade was marked in the first quarter of 2015 with a recovery in exports (5.1% against a decline of 1.8% a year earlier) along with a 4.8% drop in imports ( against an increase of 7.5% a year earlier), which resulted in an increase of 7 percentage points in the coverage ratio to stand at 74.6%.

Moreover, the level of net foreign currency reserved totalled 14,609 MTD, corresponding to 127 days of imports at the end of March 2015 against 13,097 MTD and 112 days at the end of 2014.

The dinar appreciated by 3.7% against euro and 3.4% against the Moroccan dirham during the month of March 2015.

However, it has depreciated by 0.6% against the US dollar and the Japanese yen.

During the first quarter of 2015, the dinar fell by 5% and 4.4% against the dollar and the Japanese yen, respectively, while it appreciated by 7.4% and 5% against the euro and the Moroccan dirham, respectively.

Finally, the consumer price index continued to fall during the month of March 2015 and for the second consecutive month, down 0.1%, following the drop in prices of manufactured goods (-0.4% against -0.9%) and food products (-0.1% against + 0.2%) despite the increase in prices of services (+ 0.2% against + 0.6% ).

In terms of annual shift, the increase of the price index stabilized at 5.7% as a result of unfavorable base effect. Indeed, the inflation rate was only at 3.9% in March 2014. This increase resulted mainly from the sharp rise in food prices (8% against 3.2% in March 2014) and, to a lesser extent, prices of manufactured products (5.2% against 4.2%), while prices of services kept virtually the same growth rate as that of March 2014 (4.3% against 4.2%).

Regarding core inflation, the growth rate of prices of goods excluding fresh and controlled products continued its deceleration in March 2015 for the third consecutive month (4.8% against 4.9% in February). This same trend concerned prices excluding food and energy products (4.7% against 4.8%). Thus, the level of core inflation remained significantly lower than that of overall inflation.

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