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Tunisia's political instability threatens economy - cbank

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(Globalpost/GlobalPost)

By Tarek Amara

Tunis, Feb 28 (Reuters) - Tunisia's ongoing political crisis may harm the economy, the central bank warned on Thursday, when it also said economic growth rebounded to 3.6 percent in 2012 after the 2011 revolution plunged the country into recession.

The assassination of secular politician Chokri Belaid on Feb. 6 provoked the biggest street protests in Tunisia since the overthrow of strongman Zine al-Abidine Ben Ali two years ago.

Political uncertainty had put negotiations on a $1.78 billion loan from the International Monetary Fund on hold and prompted Standard and Poor's to lower its long-term foreign and local currency sovereign credit rating on Tunisia on Tuesday.

A fall in foreign currency reserves in December underscored the economic stresses the country faces.

President Moncef Marzouki on Friday asked Interior Minister Ali Larayedh to form a government within 15 days, following the resignation of Prime Minister Hamadi Jebali.

"Recent negative developments on the national scene... would lead to a slowdown in economic activity and the increasing pressure on the financial internal and external balances, "it added.

"Positive indicators gradually continued in almost all sectors, especially energy and services, to achieve a 3.6 percent growth rate during the year 2012 compared to 3.5 percent expected," the bank said in a statement.

Tunisia's economy shrank 1.8 percent in 2011 as political instability closed factories and spooked tourists and investors.

It now faces problems as a result of the crisis in the euro zone, the main market for its exports and the source of most of its tourists and because The conflict between Islamists and secularists.

The Tunisian central bank said on Thursday it held its main interest rate at 3.75 percent, in the face of a rise in consumer price inflation to 6.0 percent in January - its highest since April 2008 - from 5.9 percent in December.

The central bank is not targeting a particular inflation rate but the most that should be tolerated would be 5 percent, the governor of central bank Chadli Ayar said.

"Foreign reserves fell to 11.38 billion dinars, or the equivalent of 107 days of imports compared to 12.576 million dinars and 119 days at the end of 2012," the bank said. (Reporting By Tarek Amara; editing by Ron Askew)

http://www.globalpost.com/dispatch/news/thomson-reuters/130228/tunisias-political-instability-threatens-economy-cbank