Thursday, September 5, 2013

Tunisia holds rate, says political crises threatens economy

    Tunisia's central bank held its key interest rate steady at 4.0 percent but voiced deep concern over the  country's political crises, saying it "threatens, more than ever, the national economy's safety and fundamentals."
    The Central Bank of Tunisia's executive board, which met on Wednesday, called on all parties to "multiply efforts so as to establish stability in the country, a factor which remains the main guarantee for a recovery of economic activity, an increase of domestic and foreign investment and job promotion."
   Tunisia has been in a crises since late July after the second assassination this year of a secular politician by suspected Islamist radicals. The secular opposition on Wednesday threatened to launch mass protests to force the Islamist-led government to step down, saying negotiations to end a political stand-off had failed, according to Reuters.
   Despite stronger growth in the second quarter, the central bank said the trade deficit had worsened over the first eight months, the growth of deposits in banks over the first seven months was lower than last year and financing of the economy had also decelerated as corporate investment was falling.

    The central bank also expressed its deep concern over the lack of visibility in the economy, adding this was reflected in the downgrade of Tunisia's international competitiveness to 83rd from 40th.
    The central bank said Tunisia's Gross Domestic Product had expanded by an annual 3.2 percent, up from 2.6 percent in the first quarter, for growth of 3.0 percent for the first half of this year compared with the target of 3.6 percent for the full 2013 year and forecasts of 4.0 percent due to economic and financial measures that the government intends to implement.
    Stronger growth in the second quarter was mainly due to better activity in manufacturing.
    But the trade deficit in the first eight months rose by 3.3 percent from the same 2012 period, putting pressure on Tunisia's current account deficit which remains high at 5.4 percent of GDP compared with 5.7 percent a year earlier, the central bank said.
    Despite this, the central bank said its net assets in foreign currency rose to 11.39 billion dinars as of Aug. 30 from 10.3 billion a year earlier, corresponding to 104 days of imports. It noted that the lowest level of this year was reached on June 18 with reserves worth 94 days of imports.
    Tunisia's inflation rate eased to 6.0 percent in August from 6.14 percent in July.
    Last month the governor of the central bank, Chedly Ayari, said the economy was in a difficult situation with foreign investments down by 1.3 percent in the first half of the year. Tunisia's dinar, which started falling in April, has stabilized since early August, trading at 2.17 to the euro earlier today, down 5.5 percent since the beginning of the year.



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