Central Bank of Tunisia

Central Bank of Tunisia A N N U A L R E P O R T 2 0 1 2 Note of the Governor i Note of the Governor The year 2011 was an “Annus Horribilis” in the full meaning of the term, as amply illustrated by the statistics and the analyses contained in the 2011 annual report of the Central Bank of Tunisia (the Bank). The risk of a “bis repetita”, e.g. a worsening of the recession, or rather the stagflation, (anaemic/negative economic growth rate cum an increasing inflation) looked, at the start of the year 2012, anything but insignificant. Indeed, the threat of what is known as the “double dip” e.g. a sinking of the economy into recession/stagflation for the second year in the row was real, indeed. The damages inflicted to the productive potential of the economy since the implosion of the 14th of January 2011 revolution, against the background of a resilient insecurity and a social, and political instability, in spite of the registered progress, make such a diagnosis plausible. Particularly, if one recalls the large exposure of our economic system to severe and chronic shocks : commercial as well as financial and monetary ones. By the end of Year I after the revolution, all components of the Tunisian development system were impaired. A record dipping of the economic growth rate, with a widening output gap, showing a weakening of the capacity of the Tunisian system to generate wealth, a process that started before the revolution. A massive accumulation of joblessness, particularly with young graduates, the most explosive of all. An aggravation of regional inequalities, matrix, if any, of the January 2011 revolution... and potentially of all the revolutions to come. A worsening of the major macroeconomic fundamentals, domestic as well as external ones : shooting up of the twin deficits (budgetary and current), higher rate of external indebtedness, accelerated depreciation of the exchange rate of the local currency vis-à-vis the US dollar and the euro, depletion of the net stock of the Bank’s holdings of foreign currencies, a continuous drift of inflation of the consumer price index etc... And last but not least, an accelerated downgrading of the Tunisia’s sovereign risk by (almost) all the major rating agencies. ii Yet, the facts, as collected and analyzed in the Bank’s 2012 report, have not always vindicated the Cassandras and other prophets of doom for whom... the worse is (always) still to come. Green, or rather greening zones, or “shoots”, are not absent from the Tunisian economic and social outlook end 2012. The remarkable inflexion, toward the better, registered by GDP growth rate, after a really appalling year 2011, the stoppage of the unemployment progress, and the net improvement in foreign currency net assets, in other words, the “upside” risks, or the “positive” risks, e.g. those that are likely to enhance the economy’s value- adding activities, are good illustrations of the green shoots mentioned above. However, the “downside” -negative risks, that threaten to further worsen the macroeconomic balances of the Tunisian development system still persist. Actually, none of the previously mentioned distortions have been reduced or contained enough to allow anyone talk about the end of the current crisis, let alone but a durable recovery. On the contrary. Two years and a half after the revolution, a number of those distortions have even worsened. We think that both the year 2013 and the year2014 should target the twin virtuous process of maximization of the upside-positive risks and minimization of the downside-negative risks, should we want to create the optimum conditions for the national economy to renew with a new cycle of growth that is durable, inclusive, sustainable and strong. Such a double targeting constitutes the very rationale of the short term as well as of the structural reform programmes embodied in the documents of economic policy namely the State general budget and the economic budget for 2013, including the strategic choices relating to the international cooperation programme, as illustrated by the recent stand-by agreement concluded with the IMF. Any reading of the said agreement out of such a context is liable to be a biased and distorted one. Before concluding, let’s talk a bit about the future also. At the time when the current report will be made public, more than half of the present year 2013 will have already gone by. Based on what we know so far on the economic and social iii outlook during the first semester of 2013, the success of the double targeting we mentioned earlier does not seem to be guaranteed. One can anticipate a rather gloomy 2013 economic and social year, against a political background full of uncertainties concerning the two important issues of the new Constitution to be enacted and the presidential/parliamentarian elections that are supposed to put an end to the transition phase. Yet, we do think that, once more, prophets of gloom could be contradicted by the facts, thanks to the important potential of recovery that the Tunisian economy is still enjoying and that should be freed from all constraints and obstacles: productive, commercial, monetary, political or institutional. During the next six months of the current year, we should bet on the potential of revival evoked earlier, with the objective to put the Tunisian economy, from 2014-2015 onwards, onto the orbit of a new era of solid growth. Chedly Ayari Governor 1st July 2013 C O N T E N T S Note of the Governor ECONOMIC REPORT 1 – INTERNATIONAL ENVIRONMENT 6 1-1. International situation 6 1-2. Capital markets 13 1-3. International foreign exchange and gold markets 15 1-4. Commodity prices 18 2 – NATIONAL ECONOMIC AND FINANCIAL ENVIRONMENT 24 2-1. Overview 24 2-2. Sectoral analysis of economic growth 27 2-3. Global demand 28 2-4. Structure and financing of investment 30 2-5. Job market and wages 32 2-6. Public finances 35 2-7. Total indebtedness 40 3 – EXTERNAL PAYMENTS 44 3-1. Balance of payments 44 3-2. Overall external position 55 3-3. Trend in competitiveness indicators 58 4 – MONEY, CREDIT AND MONETARY POLICY 61 4-1. Money and sources of monetary creation 61 4-2. Monetary policy 65 4-3. Monetary policy and inflation 71 4-4. Distribution of credit 78 5 – ACTIVITY AND OPERATING OF LENDING INSTITUTIONS 88 5-1. Banks 88 5-2. Leasing institutions 92 5-3. Non resident banks 93 5-4. Factoring companies 96 5-5. Merchant banks 96 6 – CAPITAL MARKET 98 6-1. Financing the State and investment 99 6-2. The stock market 101 6-3. Activities at mutual funds investing in securities 103 ACTIVITIES OF THE CENTRAL BANK OF TUNISIA 107 1 – GOVERNANCE 108 1-1. Reinforcing good governance practices 108 1-2. Organisation 111 1-3. System of control and management of risk 111 2 – HUMAN RESOURCES AND THE SOCIAL BALANCE SHEET 113 2-1. Management of human resources 113 2-2. Remuneration Policy 113 2-3. Training Activity 114 2-4. Social Policy 115 3 – PAYMENT SYSTEMS AND FIDUCIARY CIRCULATION 118 3-1. Payment systems and means of payments 118 3-2. Fiduciary circulation 122 4 – MANAGEMENT OF INTERNATIONAL RESERVES 125 4-1. Framework for managing reserves 125 4-2. Return on reserves 126 4-3. External managers 126 4-4. Trend in reserves 126 5 – FINANCIAL ANALYSIS OF CENTRAL BANK OF TUNISIA MANAGEMENT 129 5-1. Financial balance 129 5-2. Analysis of results 131 FINANCIAL STATEMENTS 135 ECONOMIC REPORT 1 - INTERNATIONAL ENVIRONMENT 1.1. INTERNATIONAL SITUATION The economic situation remained fragile at the world level in 2012 due essentially to economic operators confidence drop caused by ongoing sovereign debt crisis in the Euro Zone in spite of undertaken actions by governments and Central Banks to reassure capital markets and reinforce bank activity surveillance. Moreover, economic activity recovery was low in advanced countries under the combined influence of several factors. In particular, public budgets rebalancing which weighed on domestic demand, the high level of unemployment and the ongoing fragility of financial system in many countries meant a hardening of several banks financing conditions. Flat growth and economic outlook uncertainty in advanced countries had negative fallouts on the activity in emerging and developing countries. However, growth pace remained sustained in these countries thanks to pursued expansionary policies after the crisis. Hence, budget deficits were generally higher than their levels before the crisis while real interest rates have been lower and domestic credit progressed rapidly. On the other hand, ongoing conducting of accommodating monetary policies notably in industrialised countries was the main source of world economy resistance. In effect, Central banks kept on not only maintaining their key rates at levels historically low but also implementing quantitative easing measures notably through unlimited assets purchase in some cases in order to inject further liquidity in the economy, making financing conditions more favourable and re- boosting economic activity. Taking into account these trends, world economic activity grew in 2012 at a pace much more weaker than the previous year : 3.2% against 4%.World unemployment rate stabilised at 5.9% even if it rose in developed countries. GRAPHIC 1-1 : TRENDS IN CERTAIN INTERNATIONAL SITUATION INDICATORS 14 12 10 8 6 4 2 0 -2 percentage In -4 -6 -8 -10 -12 -14 2009 2010 2011 2012 2013* World growth Worldwide inflation World trade of goods and services in volume IMF forecasts (April 201 ) * Source : IMF World Economic Outlook (April 2013) In this context of economic activity slowdown and ongoing weakness of international demand, the volume of world trade in goods and services grew at a much more weaker pace from one year to another, moving from 6% to 2.5%.

Load more