Tunisia: Ongoing industry recovery as current deficit deepens

Tunisia Central Bank Executive Board met, on July 29, 2010. In a press release, it pointed out that Tunisia’s economic situation was marked in the end of July 2010 by ongoing recovery in production and exports by the industrial sector, while tourist and air transport indicators posted a certain regression compared to a year earlier.
Furthermore, progress in foreign trade went on but at a faster pace in imports than in exports; leading to wider current deficit, the coverage of which has required a tapping on foreign currency assets. These assets totaled 12,693 MTD on 28 July 2010 following reimbursement of 597 MTD with respect to Global Samourai I borrowing contracted in 2000.
At the monetary level, financing to the economy rose by 10% over the first half of the current year, compared to 4.9% over the same period of 2009. Whereas money supply grew at a slower pace, up by 4.3% vs. 5.3% a year earlier in line with a drop in net claims abroad. The average interest rate came to 4.57% in current July compared to 4.38% in June.
On the other hand, the pursuit of an appropriate monetary policy helped to limit inflationary tensions. The increase in the general index of household consumer prices was maintained at 4.8% for the third straight month.
From the beginning of the current year and up to 28 July, the dinar exchange rate recorded a depreciation of 9.3% against the US dollar and a quasi-stability against the euro.
 As for the international economic and financial environment over the last period, it  was marked by appearance of concern with regard to ongoing economic recovery, notably in the United States and the Euro Zone. Yet, positive results of stress tests for European banks helped moderate financial markets? volatility. Overall, the last IMF forecasts account for a world economic growth rate of 4.6% for the current year compared to 4.2% in estimates last April.
At the level of foreign exchange markets and during the last period, the US dollar depreciated against the other currencies particularly the euro, after posting an appreciation earlier.
On another level, the increase in the prices of some commodities, of which notably the crude oil would give rise to an increase in the inflation rate over the forthcoming period, after posting an attenuation in the main industrialised and emerging countries.
In light of these evolutions, the Executive Board decided to keep unchanged the key rate of the Central Bank, while focusing on the need to pursue monitoring of the international environment and its possible fallouts on the national economy and the financial balances.