The BCT points to gradual recovery in growth in H2, 2020

October 4, 2020

(TAP)-The Central Bank of Tunisia (BCT) pointed to a 'gradual recovery of economic growth during the second half (H2) of 2020, but at a still low rate, due to the ongoing health crisis.'

In a note published on its website, the issuing institute estimates that 'this recovery would only partially compensate for the sharp drop in activity recorded in the H1 of 2020, -11.9% compared to the H1 of 2019.'

Furthermore, the BCT emphasised that 'the latest available economic indicators show a gradual recovery in industrial production and foreign trade. However, the recovery of activity in the tourism sector and related services remains hampered by the persistence of the health crisis.

Besides, non-manufacturing industry, a strong component of which is export-oriented and therefore a source of adjustment of the balance of payments and foreign exchange reserves, continues to be seriously weakened by the recurrence of social unrest.'

With regard to the recovery of investment, the BCT considered that it 'remains surrounded by strong uncertainties, requiring a multiplication of efforts on the part of all stakeholders to ensure socio-political stability and the implementation of structural reforms necessary to improve the business climate, a prerequisite for a real recovery of investment.'

Inflation ' continued on a gradual downward trend, settling at 5.4% in annual shift in August 2020, after 5.7% the previous month and 6.7% in August 2019. This disinflationary trajectory was helped by the deceleration of core inflation, which stood at 5.3% in August 2020, the lowest level recorded since the end of 2016.'

Under these circumstances, the BCT Board of Directors deemed it necessary to continue to strengthen monetary support for the emerging economic recovery, deciding on September 30 to lower its key interest rate by 50 base points to 6.25% for the main refinancing operations, 5.25% for the overnight deposit facility and 7.25% for the marginal lending facility.

This decision 'should support the easing of monetary policy adopted since the advent of the health crisis' and also 'lighten the financial burden of loans granted to businesses and households, helping them preserve their solvency and thus contribute to financial stability.'

For the BCT ' the lowering of the key rate should support domestic demand with prospects of a recovery in consumer demand.'

Outstanding medium- and long-term loans granted to businesses (excluding the central administration) continued on an almost generalised gradual upward trend (3.4% in a year shift in July 2020, the highest level since April 2019).

There was also a generalised recovery in loans to individuals (3.4% is a year shift in July 2020, the highest level since February 2019).


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