Recent Developments & Prospects

Macroeconomic Policy

Fiscal Policy

Monetary Policy

Economic Cooperation, Regional Integration & Trade

Debt Policy

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Thematic analysis: Structural transformation and natural resources

Authors: Philippe Trape, Mickaelle Chauvin

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  • The economy is growing slowly – an expected 2.4% in 2014 (2.3% the previous year) – amid international uncertainty, notably economic problems and weak growth in the euro zone, Tunisia’s main trade partner.
  • Four years of political transition ended in 2014 with elections held and a new constitution approved. Vigilance was heightened to restore security throughout the country. Structural reforms and new investment are needed to help economic transformation and pull the country out of the crisis.
  • Regional disparities continue to grow, despite policies implemented since independence, so a medium- and long-term general strategy is needed.

Economic growth is expected to be 2.4% in 2014 (2.3% in 2013). The government had assumed 4% growth when drafting the 2014 budget, but the forecast was lowered to 2.8% in March 2014, two months after the inauguration of new prime minister Mehdi Jomâa. This was because of difficulties in the first half of the year, especially serious problems in the phosphates and oil and natural gas sectors. Phosphates output was up 20% in 2014 (to 3.79 million tonnes) but below the 5 million tonne target set by the Gafsa phosphates company (CPG). Oil production fell from 70 000 to 58 000 barrels a day. Non-manufacturing industrial output and productivity were still hampered by technical problems, outdated machinery and strikes and demonstrations. Difficulties in the mining and oil and gas sectors since 2011 have knocked a government-estimated 1% off the country’s annual GDP. As a result, growth in 2014 was largely driven by services, manufacturing and agriculture.

Some economic indicators improved. According to estimates, the budget deficit remained under control thanks to better tax collection and control of spending, and inflation continued to slow. Average overall unemployment fell slightly (0.1 percentage points) to 15.2% in 2014, including a 0.5 point drop among graduate jobseekers, albeit to a still alarming 31.4% (due to sluggish growth, a poor business climate and the labour supply not matching the needs of business). Government debt (external and domestic) has been rising steadily since 2011 due to the government’s fiscal stimulus policy, and is expected to rise to 53% of GDP in 2015, from 51.7% in 2014.

Several factors could fuel a rise in growth to an estimated 3.0% in 2015 and 4.1% in 2016. The more peaceful political and social climate following the general election and the new government in February 2015 help to reassure investors, but the 17 March 2015 attack at the Bardo National Museum in Tunis could harm investor confidence. Lower oil prices (an average of USD 65 a barrel for crude oil) should hold in 2015, helping to reduce the national energy shortfall, which was TND 3.6 billion (Tunisian dinars) in 2014, and to stabilise the economy by cutting the trade, current account and budget deficits. The drop in oil prices should also help to make Tunisia more competitive and improve the situation in the euro zone, which has already been helped by the fall of the euro against the US dollar. Exports and foreign direct investment in particular should be boosted by these favourable conditions created by measures to support demand and by the European Central Bank’s helpful quantitative-easing monetary policy.

Continued budgetary discipline begun in 2014 should curb the budget deficit in 2015 and 2016 through strict control of spending, thus raising new revenue that could revive public investment and benefit the private sector through this virtuous circle. The government could also use the favourable conditions created by lower oil prices to step up reform of energy subsidies and thus obtain more budgetary leeway. The clear parliamentary majority should enable approval of structural reforms delayed by the 2011-14 transition, including financial sector reforms and laws on competition, bankruptcy and public-private partnerships (PPPs). A smaller energy shortfall (26.7% of the trade deficit in 2014) should help reduce the trade deficit and improve the current account balance. Inflation should also ease in 2015 and 2016.

Table 1: Macroeconomic indicators

Real GDP growth2.32.434.1
Real GDP per capita growth1.
CPI inflation6.15.554.4
Budget balance % GDP-4.6-4.7-4.5-4.2
Current account balance % GDP-8.4-7.9-6-5.5

Source: Data from domestic authorities; estimates (e) and projections (p) based on authors’ calculations.