Tunisia's central bank (CBT) left the benchmark interest rate unchanged at 4.5%, underscoring a mild economic recovery seen in the first two months of the year. The CBT, however, underscored that economic growth remains below expectations, revising downwards its GDP growth for 2014 to 2.8% from the previous 3.5%. The downward revision is due to lower expectations concerning the manufacturing and trade sectors.

The central bank warned that the current macro-economic indicators remain below the government’s aspirations for economic development and job creation.

As to inflation, the CBT underscored that inflationary pressures have mildly eased in February when CPI inflation cooled to 5.5% y/y from 5.8% the month before due to lower fresh produce costs. The core CPI inflation also retreated to 6.2% y/y in February from 6.3% the previous month, the CBT noted.

Tunisia’s external position has also weakened so far in 2014 as the current account deficit widened to 1.5% of GDP in January-February from 1.2% of GDP a year earlier. This was due to the widening foreign trade gap.

FX reserves, however, remained strong totalling TND 11.475bn as of March 25, covering 105 days of imports, the CBT estimated.

The Tunisian dinar has appreciated by 4.2% and 3.8% against the USD and the EUR so far in 2014 up to March 25, the central bank said. In 2013, the dinar depreciated by 9.7% against the EUR and 5.8% against the USD.

The central bank also noted the rising liquidity needs of the banking sector in March with the inter-bank interest rates inching up to 4.72% in March from 4.68% in the month before.