Rédaction Africa Links 24 with satarbf
Published on 2024-03-06 16:45:11
During the past weeks, the National Institute of Statistics of Tunisia announced an increase in unemployment and a strong recession for two consecutive quarters. A week later, the Central Bank of Tunisia (BCT) reported a significant increase in the money supply in circulation (M2).
Yesterday, the National Institute of Statistics (INS) came back with news that the inflation rate also experienced a slight decrease, dropping from 7.8% to 7.5%. This decrease was proportionally much lower compared to what was observed for the other two indicators and what was seen in neighboring comparable countries.
This has left even the most knowledgeable in economics and monetary theories puzzled.
INS announced a small decrease in inflation, a negligible decline. This seems rather inconsistent to me, based on the teachings of economic theory.
Three main reasons support my reservations:
1. The significant drop in growth rates experienced during the last two quarters should have a greater impact on the decrease in the inflation rate, especially during the low consumption season. Tourism is dormant, agricultural productions (such as oil, dates, organs, vegetables, etc.) are rather good, and other factors lead me to say that the inflation measurement indicator through the consumer price index does not accurately capture the price variations of its main components. Especially considering that this index does not include 45% of economic sectors operating in the informal and non-market sector, according to INS concepts. The index does not consider substitution effects (cheaper products replace more expensive ones). And it ignores differentiated increases based on geographical and economic regions.
2. In partner countries, the inflation rate is plummeting, dropping below 3% in Europe. The trade balance has improved in value, precisely due to the observed price decreases in the international markets of the main food products regularly imported by Tunisia. This is another reason that makes me wonder why the inflation rate in Tunisia remains at a very high level despite everything!
3. Recent data published ten days ago indicated that the money supply (M2) experienced an almost 20% boom on an annual basis. It can be inferred that the advances granted by the Central Bank to the government explain this increase. But here again, one wonders whether these variations in the money supply are captured by the consumer price index. The trends are contradictory in their intensity and dissonant in their interdependencies.
It is certain that the first two reasons are somewhat opposed to the third reason. There would be compensations and cross-elasticities. But why doesn’t INS explain them explicitly and interpret them explicitly to help decision-making within the state, and to better anticipate markets for investors and consumers? Ramadan is approaching, and Tunisians are concerned about shortages and price spikes in basic products.
But the most significant doubt lies in the reliability of the inflation measurement thermometer in Tunisia. Faced with these opposing forces, we are lost, and INS does nothing to unravel the citizens and help them understand the causes and truths.
In Tunisia, in recent years, it is believed that the inflation thermometer more easily records price increases than decreases. This thermometer rises quickly and falls very weakly, only to rise again shortly after. Deflation is less interesting to measure than inflation.
Several economists have criticized INS for its calculation methods, heavily reliant on an imperfect consumer price index that tends to overestimate the inflation rate, to the delight of banks, workers’ unions (salaries indexed to inflation), and the state itself, whose tax revenues depend on price levels (ad valorem tax). Budget items are also indexed to inflation, the more exaggerated inflation is, the more budgets allocated to ministries increase.
All this coincides with a key interest rate that has remained at 8% for at least 2 years. This is said to reduce inflation and bring it back to 2%, from over 10% a few months ago.
The real key interest rate has become de facto positive, exceeding the inflation rate. This is one of the conditions and recommendations of the IMF. A respected macroeconomist has stated that “Tunisia has become a good student again, doing the opposite of what official discourse denounces.”
How long should we believe these rather politicized statements, and how long should we wait for Tunisia to have inflation under control, well measured, with reliable and trustworthy indicators?
The time has come to seriously examine this issue. An issue that undoubtedly contributes to maintaining confusion… and the lingering economic gloom in Tunisia.
Read the original article(French) on Tunisie Focus
