Inflation now weighed down by upside risks

African Manager

11-04-2025

The future path of inflation in Tunisia will remain surrounded by upward risks, with rates fluctuating between 5 and 6%.
This forecast comes from an expert, namely Mohsen Hassan, a former minister and economic advisor.
In the following interview with TAP, he explains that Tunisia, which has managed to overcome this problem, needs effective monetary and government policies more than ever.
The latest INS inflation figures have just been published. What is your assessment of this slight increase?
The figures show that the rise in inflation in March comes after several months of decline.
This trend is mainly due to the increase in food prices, a key factor during the Ramadan period, which coincides with increased consumption habits in Tunisia.
The textile and footwear sectors also contributed to the increase, linked to the end of the sales period and increased demand for the Eid-al-Fitr holiday.
These are the immediate causes. But there are also deeper causes, notably persistent structural weaknesses.
It is important to remember that the decline in inflation in recent months is the result of the restrictive monetary policy pursued by the Tunisian central bank and the government's efforts to supply the markets.
However, the recent rise in inflation is mainly due to structural problems, such as the poor management of agricultural systems, particularly with regard to storage and the building up of strategic stocks.
Food, especially fresh food, plays a central role in inflation dynamics.
Another factor is the inability of supply and production to keep pace with growing demand, especially in certain sectors such as red meat.
The price of lamb, for example, had risen by around 21.9% by the end of March 2025.
I therefore recommend developing the sectors concerned and implementing sectoral policies to address any shortcomings.
Another key issue is distribution channels.
It is imperative that the government takes urgent action to reform and modernize these channels, strengthen markets and improve economic control.
On the international front, global inflation has recently receded and commodity prices have fallen.
But imported inflation remains a factor weighing on the Tunisian economy, hence the importance of maintaining a prudent monetary policy and monitoring the dinar's exchange rate.
Following this analysis, what are your forecasts for the months ahead?
I believe that Tunisia's inflation trajectory remains exposed to upside risks and still poses a threat, for several reasons.
Some are external, linked to global geostrategic upheavals and the protectionist policies adopted by many countries in response to the increase in customs duties imposed by the United States.
This could lead to a rise in global inflation and an economic slowdown affecting Tunisia's partner markets, such as the European Union.
However, two international factors could benefit Tunisia:
The rise in the dinar against the dollar, linked to the latter's fall against the euro, which will reduce the cost of dollar-denominated imports;
The fall in the price of oil on the world market, which will lighten Tunisia's energy bill, a major component of the trade deficit.
This could enable the government to reactivate the fuel price adjustment mechanism, thus reducing pressure on production costs and inflation.
These indirect effects of the Trump administration's protectionist policies could therefore limit the impact of inflation on the Tunisian economy.
As far as domestic factors are concerned, inflationary risks are very real, due to the weak production capacity of the national economy and the difficulties of public finances.
It is therefore essential to stabilize supply and demand, by boosting production, reforming agricultural sectors, addressing sectoral shortcomings and improving the business climate.
In my view, inflation should be between 5% and 6% in the next three months.
This level does not require an increase in the central bank's key interest rate, which was recently cut to 7.5%.
Nevertheless, a prudent monetary policy remains necessary, accompanied by government measures to contain inflation.
Doesn't the INS risk fuelling criticism of the reliability of its data by announcing a rise in inflation?
The INS and the Central Bank are sometimes criticized for their data, but I would like to stress that both institutions have advanced statistical systems based on internationally recognized methodologies.
The INS is one of the few institutions in Africa that revises the composition of the consumer basket used to measure inflation every five years, based on a national consumption survey.
This demonstrates the level of development and transparency of the Tunisian statistical system.