Tunisia’s central bank decided to leave the benchmark interest rate unchanged at 4.75%, forecasting a 3.0% GDP expansion this year, up from a revised 2.5% in 2014. The expected growth, however, remains modest amid the challenges facing the government to boost investment and employment, the central bank underscored.

The central bank was upbeat on the recent success in placing the $1bn ten-year bond that was almost four-fold oversubscribed, implying renewed investor confidence in Tunisia’s outlook. Such positive environment amid stabilising political situation will help lure more foreign capital to boost economic growth.

The bond proceeds will help cover Tunisia’s budget needs for 2015 and shore up FX reserves, the central bank noted.

The central bank, however, warned about the sluggish industrial output that grew just 0.3% y/y in the first ten months of 2014, braking from a 2.1% annual rise the year before.

Exports of main industrial exporting sectors continued to progress over the first eleven months of last year, as well as imports of raw materials, semi-finished products and capital goods.  Those parameters imply a better economic growth outlook over the forthcoming period, the central bank said.

The central bank also warned of ongoing fall in the services sector’s activity indicators at the end of December, notably tourism and air transport.

On the external sector, the central bank underscored that the CA deficit has widened to TND7.385bn in 2014, accounting for 8.9% of the full-year forecast GDP. The CA gap stood at TND6.302bn in 2013, accounting for 8.3% of GDP.

The CA gap was financed by the central bank’s FX reserves and foreign loans. FX reserves, however, increased to TND15.055bn as of end-January, covering 112 days of imports. FX reserves were supported by external borrowing, and net foreign inflows, that have reached TND9bn in 2014, according to the central bank.