Tunisia’s central bank keeps key rate on hold at 4.75%, warns of widening CA gap and shrinking industrial output

By bne IntelliNews November 27, 2014

Tunisia’s central bank decided to maintain the benchmark interest rate unchanged at 4.75%, warning that the country’s external position continues to deteriorate amid widening current account deficit and its consequent impact on the country’s financial outlook. The bank called on authorities to boost the implementation of measures aimed to improve the business environment in order to stimulate FDI and GDP growth.

The central bank underscored the strong performance in the agriculture sector but warned of falling industrial production, mainly in the value-added manufacturing sector. Tourism proceeds rose 10.5% y/y in the first ten months of the year but tourism arrivals and nights dropped over the period, the c-bank underscored.

On the external sector, the central bank warned that the CA deficit has expanded 29% y/y to TND6.396bn in January-October, accounting for 7.7% of the full-year forecast GDP, compared to 6.5% of GDP the previous year amid widening trade gap.

The CA gap was financed by the central bank’s FX reserves and foreign loans. FX reserves, however, remained at an acceptable level of TND12.759bn as of November 26, covering 111 days of imports, up from 107 days a year earlier. FX reserves were supported by external borrowing that has reached TND 5.4bn so far this year, the central bank said.

The central bank underscored the easing CPI inflation to 5.4% y/y in October from a previous high of 6.0% y/y. Core inflation also cooled to 5.7% y/y in October from 5.8% y/y a month earlier. 

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