The Board of Directors of the Central Bank of Tunisia expressed, in its meeting, Tuesday, its deep concern about the upward risks surrounding the prospects for the development of inflation. He stressed the importance of coordinating economic policies to avoid any inflationary slide that might exacerbate weaknesses and impede the recovery of economic activity.
By the way, the Council reviewed the latest economic and financial developments and decided to raise the main interest rate of the Central Bank by 75 basis points to reach 7.0 percent, which will lead to an increase in the rates of deposit facilities and marginal loan to 6.0 percent and 8.0 percent, respectively. This decision will enter into force on May 18, 2022.
The Council stressed the need to initiate as soon as possible the necessary structural reforms that would return economic growth to an upward path with the aim of ensuring macroeconomic stability and the sustainability of public debt.
The Board of Directors of the Central Bank noted, with regard to prices at consumption, the continued acceleration of inflation, which reached 7.5 percent in April 2022 (calculating the annual slip), after recording 7.2 percent in the previous month and 5 percent in April 2021, i.e. higher A level recorded since the end of 2018. The escalation of inflation is due to the acceleration of the prices of manufactured goods, which increased by 9.3 percent, in terms of the annual slippage (compared to 5.1 percent a year ago) and food prices, which rose by 8.7 percent (compared to 4 9 percent in April 2021).
On the other hand, the Council indicated that the gradual upward trend, which was followed by core inflation “without considering fresh foodstuffs and items with framed prices” since 2021, has accelerated to exceed the 7 percent threshold in April 2022, after recording 6.6 percent in the previous month, compared to 5 percent a year ago.
The Council considers that the transmission of inflationary pressures emanating from abroad to domestic prices, on the one hand, and the repercussions of the expected adjustments to the prices framed within the framework of reforming the subsidy system, on the other hand, would maintain inflation at historically high levels, whether during 2022 or 2023.
At the level of the external sector, the Council recorded a widening of the current deficit, which amounted to -2.7 percent of GDP during the first four months of 2022, compared to -1.7 percent in 2021, due to the deterioration of the trade yield. On the other hand, the level of exchange reserves amounted to 23.655 million dinars, equivalent to 124 days of supply on May 16, 2022, compared to 23.313 million dinars and 133 days of supply at the end of 2021.
The latest available data, according to the bank’s statement, indicate a rapid and generalized rise in inflation around the world, which contrasts with the fragile recovery in global growth, which was weakened by the repercussions of the Russian-Ukrainian crisis. Despite the downward revision of global activity, prices continued to increase in accordance with the developments of the aforementioned crisis, on the grounds that the almost generalized rise in international prices of basic materials and the continuous disturbances at the level of supply chains had intensified their severity, which led to fueling inflationary pressures at the level of the entire price chain. It is expected that these pressures will be more sustainable.
The statement of the Central Bank of Tunisia indicated that in this context, many central banks around the world headed towards tightening their monetary policies.
In its statement, the Central Bank of Tunisia indicated that the national economic activity supported mainly by the industrial sector continued during the first quarter of 2022 with its gradual support to reach 2.4 percent in the calculation of the annual slip, compared to 1.6 percent in the fourth quarter of 2021. The industrial sector contributed an important amount In the recovery of the volume of exports, which increased by 14 percent, accounting for the annual slip, compared to 4.4 percent in the last quarter of 2021. The continuous rise in imports of raw materials and semi-manufactured materials during the period under study will facilitate the continuation of the recovery of industrial production in the coming months. It is expected that the improvement of the epidemiological situation and the lifting of health restrictions will enhance the recovery of services, especially those related to the tourism sector.
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