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Tunisia’s Central Bank Expects Inflation to Drop to 6.9%

Tunisia’s Central Bank Expects Inflation to Drop to 6.9%

Thursday, 5 September, 2019 - 09:00
Central Bank of Tunisia. Reuters file photo

The Central Bank of Tunisia (BCT) expects the inflation to drop to 6.9 percent by the end of this year, compared to at least 7.8 percent in 2018.

BCT Governor Marouane El-Abassi said inflation will remain high but will witness a gradual decline in 2020 and 2021 reaching 6.5 percent and 5.9 percent, respectively.

He noted that inflation levels are high mainly due to high energy prices and frequent increases in the public sector wages, which is a source of contention with the International Monetary Fund (IMF).

IMF demanded Tunisia to reduce wages from about 14.1 percent in the current budget to around 12 percent of the GDP.

Tunisian economic expert Jannette Ben Abdallah said it was imperative to find new markets for Tunisian products in an effort to give a boost to the economy.

She also called for increasing the volume of exports away from traditional markets in Europe, which in turn are under economic pressure.

The expert called for pushing domestic and foreign investment to contribute to the creation of wealth and employment opportunities for more than 630,000 unemployed workers.

The Central Bank predicted that core inflation, which is mainly related to the consumer price index (cpi), excluding fresh and subsidized products, is expected to reach 7.6 percent this year, after hitting all-time high of 8.2 percent over the past year.

During the next two years, inflation is expected to decline gradually to settle according to these official projections at 7.3 percent in 2020 and about 6.8 percent in 2021.

The Central Bank’s “Economic and Monetary Developments and Medium-term Prospects” shows that the updated forecasts seemed more optimistic by confirming a drop in the inflation rate due to the improvement of the exchange rate of the Tunisian dinar in recent months.

The gradual decline in inflation will be supported by the moderate pace of consumer demand, and the government's stance on restrictive monetary policy.

The Bank said it would “remain vigilant about inflation developments in the coming period, and would make every effort to ensure that it returns to sustainable levels, using all the instruments at its disposal,” the note reads. 

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