Wednesday, May 29, 2013

Tunisia holds rate steady to help stimulate exports

    Tunisia's central bank held its key interest rate steady at 4.0 percent to help create an environment that can stimulate economic activity, in particular the export sector.
    The Central Bank of Tunisia, which raised its rate by 25 basis points in March, said growth estimates for the first quarter showed annual growth of 2.7 percent, down from 4.0 percent in the fourth quarter of 2012, below the planned 4.0 percent growth for 2013.
   In 2012 Tunisia's Gross Domestic Product expanded by 3.6 percent, reversing a 1.9 percent contraction in 2011 when the economy suffered from political upheaval, known as the Arab Spring that began in Tunisia in December 2010.
    The decline in first quarter growth was due to lower output from agriculture, fishing and non-manufacturing such as mining, while manufacturing, transport and telecommunications showed a positive trend. Tourism, however, continues its decline since the beginning of the year.
    The dinar's exchange rate "has faced some tensions" since early May, falling 4.1 percent against the euro and 6.1 percent against the U.S. dollar by mid-May due to demand from some firms for foreign exchange for import settlements or profit transfer, the central bank said in a statement after a meeting of its executive board on May 27.

     However, the bank added it had intervened to fine-tune the foreign exchange market to ease these pressures and by May 24 the rate had returned to a more normal rate of 2.139 dinars to the euro and 1.65 to the U.S. dollar.
    Tunisia's inflation rate eased slightly in April to 6.4 percent from 6.5 percent in March but the central bank, which also raised its key interest rate by 25 basis points in 2012, said the monthly rise in inflation of 0.7 percent "confirms persisting inflationary pressure for most consumer products despite a decrease in fresh food prices."
    Despite a decline in Tunisia's current account deficit fell to 2.5 percent of GDP in the first four months, down from 2.8 percent in the same period last year, the central bank said pressure on the balance of payments persisted due to a drop in the surplus of financial operations with other countries, in line with a tightening of income from foreign direct investment and drawings on medium and long term borrowing.
    The level of foreign currency reserves fell to the equivalent of 95 days of imports per May 24, down from 101 days a year earlier and 119 days at the end of 2012.


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