The board of directors of the Central Bank of Tunisia, meeting on Thursday June 20, 2024, reviewed recent economic and financial developments at the international and national level, and the medium-term inflation outlook.
Internationally, the gradual easing of the rate of increase in consumer prices has continued in recent months, but at a relatively slow pace. Recent international forecasts expect a slow convergence of inflation towards central bank targets, in relation to upward pressure on international prices of basic products and raw materials.
Despite a certain optimism in the markets with regard to generalized monetary easing, the prospects of stubborn inflation would nevertheless continue to weigh on the direction of the monetary policy of the Central Banks of the main international economies.
0.2% progress
At the national level, economic growth increased moderately by 0.2% (year-on-year) in the first quarter of 2024. The latest available economic indicators suggest a gradual recovery in activity during the second quarter of 2024, which will be supported by the resumption of activity in the agricultural sector and the strengthening of activities in the services sector.
The current deficit was reduced to 1,581 MTD (or -0.9% of GDP), at the end of the first five months of 2024, compared to 3,596 MTD (or -2.3% of GDP) a year previously. This result is due, in particular, to the continued contraction of the trade deficit (FOB-CAF) which stood at 6,413 MTD (compared to -8,101 MTD at the end of May 2023), supported by the good performance of the olive sector. . If it had not been for the continued widening of the energy deficit, the share of which in the trade deficit increased from 57.8% during the first five months of 2023 to 77.6% during the same period of year 2024, the current account would have been in surplus.
Consolidation of foreign exchange reserves
Foreign exchange reserves continued to consolidate, reaching 23,620 MTD (or 108 days of imports), as of June 19, 2024, compared to 22,728 MTD (or 98 days of imports) a year earlier.
Inflation
In terms of consumer prices, the inflation rate stabilized at 7.2% (year-on-year) in May 2024 compared to 9.6% a year earlier, thanks to a relative easing of underlying inflation “excluding fresh food products and products at administered prices” which stood at 7.3% in May compared to 7.5% the previous month, despite the acceleration in the pace of increase in prices of fresh food products (10.8% in May compared to 9.7% in April 2024).
The outlook for consumer prices suggests a gradual easing of inflation, but remains surrounded by upside risks, which remain active in the short and medium term and could arise, in particular from the rise in international prices of basic products and energy against a backdrop of exacerbation of geopolitical tensions, water stress, and the situation of public finances above all, in the absence of mobilization of external resources.
The council considers that the risks surrounding the future trajectory of inflation call for caution and patience, and that it is important to continue to support the process of inflation converging towards sustainable levels. It therefore decides to keep the key rate of the Central Bank of Tunisia unchanged at 8%.
