- More pronounced delays in the IMF package and more specifically in Tunisia's access to funding will cause prolonged shortages of goods in the domestic market and weigh on the dinar, leading to even higher inflation
According to Zawya article published on February 13, 2023, Tunisia's inflation will accelerate from 8.3% in 2022 to 9.5% in 2023, mainly due to higher taxes and lower food and energy subsidies, according to a commentary published by Fitch Solutions Country Risks & Industry Research and independent sources.
It explained that lower (higher) food and energy prices than currently expected could affect forecast for inflation. Meanwhile, «a deeper cut in subsidies than we are currently factoring in could also drive inflation beyond our forecast.»
More pronounced delays in the IMF package and more specifically in Tunisia's access to funding will cause prolonged shortages of goods in the domestic market and weigh on the dinar, leading to even higher inflation, Fitch Solutions pointed out. In the event of more acute inflationary pressures than expected, the Central Bank of Tunisia (CBT) will implement more aggressive monetary tightening,
Fitch Solutions also said while, it was anticipated that the government would implement austerity measures in 2023, the reforms included in the 2023 Budget came slightly above expectations, especially with the imposition of more taxes than anticipated.
«We are now forecasting higher local energy prices as the 2023 Budget revealed aggressive cuts in energy subsidies.» This upward pressure will more than offset the expected 4.1% y-o-y decline in global oil prices that Fitch Solutions Oil & Gas team foresees.
It added that this acceleration in inflation will provide impetus for the CBT to tighten monetary policy.
Fitch Solutions forecast that the CBT will raise its key rate by an additional 50 basis points (bps) to 8.50% by end-2023 to contain acute inflationary pressures.
In its December 30 Executive Board Meeting, the CBT decided to hike its key rate by 75 basis points (bps) to 8.00% starting January 2 2023. This followed two hikes in 2022, comprised of 75bps in May and 25bps in October.
«While the CBT kept its key rate unchanged in its February 1 meeting, we expect that it will increase its key rate by an additional 50bps in the course of 2023 as inflation will continue to accelerate in coming months,» it noted.
