Revolution and Libyan Crisis Triggers Tunisian Inflation, Says AfDB Report

25/04/2012
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The aftermath of the revolution in Tunisia and the Libyan crisis has had implications for inflation in Tunisia, according to a new study by the African Development Bank.

In the study, from the AfDB’s Chief Economist’s department, the authors attempt to review the factors behind inflation in Tunisia during the early months of 2012.

Over this period, year-on-year inflation rose to 4.9 percent in January and accelerated to 5.7 percent in February, compared to 3.5 percent over 2011.

According to the authors, this inflation could be explained by the inclusion of an increase in producer prices, a depreciation of the Tunisian dinar against the euro and the dollar, and the adoption of an expansionary monetary policy marked by decreasing interest rates in order to lower reserve requirements for the banks.

The Libyan crisis and the development of a black market across the Libya-Tunisia borders led to the shortage of basic foodstuffs and therefore a significant increase in prices for certain products.

In addition to these factors, this note highlights the differences between the official inflation and the inflation felt by the Tunisian population.

These differences are due to disparities between observed and market prices - only the latter have been used to calculate inflation. The authors explain that changes in consumer preferences could also be a cause behind the perceived difference between the official inflation rate and the one experienced by consumers.

They recommend a regular review of the consumer price index, and suggest the calculation of several inflation indices based on different consumer baskets, for example, by socio-professional group, by region, etc.