It comes after the US Federal Reserve on Wednesday set interest rates, following 10 consecutive hikes that began in March 2022.
“At the international level, recent information points to a continued slowdown in global economic growth and inflation, and concerns have risen somewhat about declining economic activity in the world’s most powerful economies due to the entry of the euro area economy into a state of technical recession during the period The first quarter of 2023.
He added: “Unlike the Federal Reserve, which approved a truce on monetary tightening at its last meeting, the European Central Bank continued the tightening cycle, as it decided on Thursday, to raise interest rates. interest of 25 basis points, to reach 4% for major refinancing operations and 3.5% for deposit facilities” and 4.25% for marginal lending facilities, while expressing its determination to so that inflation returns, as soon as possible, to its medium-term objective of 2%.
Inflation is falling
Regarding inflation in Tunisia, the Central Bank said that inflation in Tunisia has started to show a gradual decline, which started last March, indicating that inflation reached 9.6% last May, after having registered 10.1% in April 2023, compared to a peak of 10.4%. in March February 2023.
He explained that this dynamic was characterized by an easing of underlying inflation “without taking into account fresh foodstuffs and items priced by the government”, which fell to 9.3% in May 2023 against 9 .5% the previous month and a slowdown in growth. rate for fixed price items (5% compared to 6.5% in April 2023). On the other hand, the prices of fresh produce continued to increase by 19% in May 2023.
The Central Bank estimated that despite this easing, inflation is still at historically high levels relative to the productive capacity of the economy.
Recent forecasts from the Central Bank of Tunisia indicate that inflation will continue to decline gradually over the coming months and that the upside risks surrounding this trajectory will remain relatively high.
Credit Rating Downgrade Risks
Regarding Fitch’s downgrading of Tunisia’s credit rating, the central bank statement warned of the impact of this further downgrade on Tunisia’s ability to enter the debt markets and obtain a external financing, on acceptable terms, and on smooth settlements with foreign countries.
The Central Bank of Tunisia estimates that maintaining the key rate at its current level will continue to support the course of reducing inflation over the coming period, to bring it back to sustainable levels.
Economic growth
At the local level, the Tunisian Central Bank indicated that the country’s economic growth reached 2.1% during the first quarter of 2023, after registering 1.8% in the last quarter of 2022.
Export industries have grown, and the tourism sector and related activities have spurred economic growth. However, the poor performance of extractive industries continued into early 2023, depriving the economy of significant additional foreign exchange resources.
In the external sector, the Central Bank of Tunisia noted the continued gradual reduction in the current account deficit, which stood at -2.2% of GDP at the end of May 2023, against -4.6% a year earlier. early.
Tunisia is suffering from a worsening economic crisis with a sharp rise in the inflation rate and commodity prices, and it is seeking an agreement with the International Monetary Fund to obtain financing of around 1.9 billion to support its budget, but the deal stalled due to political pressure and the government’s inability to impose the austerity measures required by the Fund.
In December, the Tunisian Central Bank raised the main interest rate by 75 basis points to 8% to combat high inflation, and it was the third rate hike in the past year.
Read the Latest World News Today on The Eastern Herald.
