Tunisia The pick-up in growth in 2020-21 to above 2% will be driven by investment, which will benefit from the implementation of the new law designed to simplify the business environment and from continued solid foreign direct investment. Slower euro area growth will weigh on exports. Inflation is expected to fall, with food prices remaining moderate thanks to good agricultural prospects. The current account deficit is expected to decline modestly on the back of an improved trade balance and a strong performance in tourism, foreign direct investments and remittance inflows. Unemployment will only fall slightly. The monetary policy stance is appropriate. Previous increases in the key policy rate have helped curb inflation. Despite an improvement in tax collection, it will be difficult to meet the objectives for the budget deficit and public debt as a result of higher salaries and interest payments. A stricter budgetary discipline is required in order to free up room for targeted social expenditure and to lower debt. A reform of subsidies, better targeting of social programmes and structural reforms are necessary to attain fiscal targets without further reductions in public investment. Economic activity is struggling to recover Growth in the first half of 2019 was driven by good cereal harvest and strong tourism activity. However, industrial production continued to fall, mainly in the manufacturing sector, especially electrical and mechanical and textile industries which have suffered from the decline in external demand, and oil and gas industries. Nevertheless, production of phosphates is beginning to improve. Ongoing high levels of unemployment and inflation continue to weigh on private consumption.
Tunisia 1 Inflation is trending downward
Real wages have risen recentlyยน
Y-o-y % changes 10 9
Y-o-y % changes 5 Total
Private non-farm average wage
Food & beverages
Non-farm minimum wage
4
Farm minimum wage
8
3
7
2
6
1
5 0
4
-1
3
-2
2
-3
1 0
2015
2016
2017
2018
2019
0
0
2014
2015
2016
2017
2018
2019
-4
1. Real wages are defined as nominal wages adjusted for consumer price inflation. Non-farm minimum wages correspond to a 40-hour work week. Data for 2019 represent the average for January to August. Source: INS. StatLink 2 https://doi.org/10.1787/
2|
Tunisia: Demand, output and prices 2016
2017
Current prices TND billion
Tunisia GDP at market prices Private consumption Government consumption Gross fixed capital formation Final domestic demand Exports of goods and services Imports of goods and services
89.7 64.5 18.4 17.3 100.2 35.9 45.6 - 9.6
Net exports1 Memorandum items GDP deflator Consumer price index Unemployment rate (% of labour force) Central government financial balance (% of GDP) Current account balance (% of GDP)
_ _ _ _ _
2018
2019
2020
2021
Percentage changes, volume (2010 prices)
1.9 2.4 0.3 0.3 1.6 4.6 3.5 0.1
2.5 2.1 0.3 2.0 1.7 5.7 4.1 0.2
1.3 1.8 0.8 0.3 1.4 -2.0 -1.6 0.0
2.1 2.0 1.0 2.0 1.8 1.1 0.7 0.1
2.3 2.0 1.2 3.2 2.1 2.2 1.6 0.1
5.3 5.3 15.4 -6.2 -10.3
7.0 7.3 15.5 -4.8 -11.1
7.4 6.9 15.3 -3.5 -9.3
6.4 6.4 15.0 -3.0 -9.0
5.9 5.9 14.8 -2.8 -8.8
1. Contributions to changes in real GDP, actual amount in the first column. Source: OECD Economic Outlook 106 database.
StatLink 2 https://doi.org/10.1787/
Tunisia 2 Credit growth is slowing Y-o-y % changes 25
The current account deficit has improved slightlyยน Balance of factor income and current transfers
Total loans
% of GDP 20
Trade balance (FOB)
Loans to industry
Balance of services
15
Current balance
10
Loans to the service sector
20
5
15
0 10
-5 -10
5 -15 0
2011
2013
2015
2017
0
0
2010
2012
2014
2016
2018
-20
1. Data for 2019 correspond to the first six months of the year. Source: Central Bank of Tunisia. StatLink 2 https://doi.org/10.1787/
|3 Headline and core (excluding fresh food and administered prices) inflation have been on a downward trend since the start of the year but remain high. In addition to a tighter monetary policy, the good performance of the dinar and moderation in oil prices have had a positive impact. Despite improved tourism revenues and remittances, the current account deficit remains high, in particular due to the high trade deficit, the energy deficit representing 38% of the trade deficit. After a long period of depreciation, the dinar seems to be recovering, mainly as a result of the consolidation of foreign exchange reserves.
Structural reforms are needed to stimulate investment The central bank increased its key rate several times until February 2019, which helped make real interest rates positive again but has also led to a deceleration of lending. At the start of 2019, public expenditure increased at a faster pace than revenues. The savings generated by the reduction in the number of public employees were partly offset by wage increases. The debt burden has increased. To date, efforts to contain spending have been focused on investment. Public debt represents around 75% of GDP, most of which (over two-third) is external, which leaves it vulnerable to exchange-rate variations. The proportion of investment in GDP is declining steadily, as the slowdown in capital goods imports suggests. In April 2019, a series of measures were adopted with a view to improving the business environment, simplifying business creation procedures and access to financing, and facilitating publicprivate partnerships (PPP). The start-ups law should help stimulate investment and create high-quality jobs. The exit of Tunisia from the blacklist of the Financial Action Task Force should also encourage foreign direct investments. Promoting quality education through better teacher training, particularly in inland areas, would help integrate more people into the labour market. Tunisia should aim to upgrade its tourism infrastructure in order to expand the sector and attract new visitors.
Growth is expected to strengthen gradually Growth will strengthen, with investment benefiting from measures designed to simplify the business environment and from the resolution of uncertainty surrounding the forming of the government. Private consumption will be buoyed by the increase in real wages but will continue to be held back by high unemployment. However, the slowdown in euro area growth will affect exports. This impact may be offset by a solid performance of foreign direct investment, which would encourage exports. The fragmentation of the political landscape risks complicating the implementation of structural reforms.