By Central Bank News
Tunisia’s central bank held its benchmark interest rate steady at 3.75 percent as the economy continues to improve gradually but inflation could rise in coming months.
Banque Centrale de Tunisie, which raised its rate in August by 25 basis points, said the pressure on prices and the balance of payments warrants watching and financial balances must be preserved.
Tunisia’s consumer prices rose 0.8 percent in October from the previous month for an annual rise of 5.3 percent, down from September’s 5.7 percent due to lower food prices, the bank said, adding:
“It is worth noting that certain provisional indicators augur for the return of a rise in inflation in coming months.”
Tunisia’s central bank does not have a specific target for inflation, but the governor said last month that the bank would tolerate inflation of up to 5 percent.
Tunisia’s economy has been gradually improving this year after contracting by 2.2 percent last year following political unrest that triggered the Arab Spring across North Africa.
The central bank said the economy expanded by an annual 2.6 percent in the third quarter for a 3 percent expansion in the first nine months, with agriculture, services, mining and energy improving.
“By contrast, pressure from lethargic external demand keeps on affecting production in manufacturing industries and exports because of the persistence of economic and financial difficulties in Tunisia’s main partner countries in the European Union,” the bank said.
Tunisia’s trade deficit rose in the first 10 months of the year with the current account deficit widening to 6.9 percent of Gross Domestic Product, up from 5.8 percent in the same 2011 period. Foreign reserves also declined to the equivalent of 94 days of imports as of Nov. 26 compared with 113 days at the end of 2011, the bank said.
The outstanding balance of deposits in Tunisia’s banking sector rose by 5.4 percent in the first 10 months from the same period last year, the central bank said.
In its statement, Tunisia’s central bank made no mention of consumer credit, which has concerned the bank. Since October, the central bank has required commercial banks to hold reserves equal to the amount of new consumer credit issued to contain inflation.