During the meeting on October 5, 2022, the Board of Governors of the Central Bank of Tunisia (BCT) examined the latest economic and financial developments and decided to raise the policy rate of the Central Bank of Tunisia by 25 basis points at 7.25%.
As a result, BCT announces in a published press release that deposit and 24-hour marginal lending facilities have been increased to 6.25% and 8.25% respectively. This decision will enter into force on 6 October 2022.
The board also decided to raise the interest rate on savings (TRE) by 25 basis points to 6.25%.
The BCT emphasizes that at the international level, growth in the main economies has weakened recently, the prices of basic products and commodities, especially oil, have continued their downward trend, although they remain at high levels, while global inflation has fallen to historically high levels. levels. Central banks stick to their price stability mandate, but continue to tighten their monetary policy, resulting in a significant tightening of international financial conditions. The restrictive stance of monetary policy in the major economies is likely to intensify in the coming period, with particularly strong inflationary pressures looming on the horizon, expected to be fueled by the energy crisis looming over Europe as winter approaches. The growth momentum in the world economy should slow down, which has caused several international institutions to downgrade their projections for the world economy.
At the national level, economic activity weakened in the second quarter of 2022, particularly on the back of underperforming non-manufacturing industries. In addition, the good results of activity in the manufacturing industry, especially exports, in the first half of 2022, which have continued in recent months, have helped to support the country’s exports. Domestic demand also improved after all health restrictions were lifted, increasing pressure on import flows.
As regards consumer prices, the Council notes the continuation of the accelerated and general increase in inflation, which reached 8.6% in August 2022, i.e. the highest level in more than three decades. In particular, the Board notes that core inflation “excluding fresh food and products at administered prices,” a measure of core inflation, accelerated to reach 8.5% in August 2022, following 8.2% the previous month and 5.3% a year earlier.
At the level of the external sector, the Council notes the accentuation of the widening of the current account deficit, which amounted to -5.8% of GDP in the first eight months of 2022 against -3.6% a year earlier due to the deterioration of the trade balance (-10.1% of GDP against -6.6% at the end of August 2021). The level of foreign reserves stood at 23,848 MTD (or 112 days of imports) on 29 September 2022 against 23,313 MTD or 133 days at the end of 2021.
The board assesses that inflationary pressures will remain active and expects the impact of both internal and external factors, which are currently intensifying pressure on consumer prices, to continue in the coming quarters. In particular, the weakness of the economy’s production potential in the face of progressive demand is a main source of inflationary pressures that can sustain the significant upward effects from outside.
He expressed his concern about the upside risks associated with the future path of inflation and stressed the importance of the coordination of economic policies to avoid an inflationary shift that could accentuate economic and financial vulnerabilities. To this end, it calls on all stakeholders to support the Central Bank’s efforts in its fight against inflation and the preservation of financial stability.