Tunisia remains a country of contrasts; while important progress has been made on completing the political transition to an open and democratic system of governance, making the country a unique example in the Middle East and North Africa (MNA) region, economic transition has not kept pace. Internal constraints, notably the fragmentation of the political party system and the related difficulty in reaching consensus on the key economic reforms, have combined with external constraints, mainly the conflict in Libya and the continued threat of terrorism, to slow down economic recovery and to generate growing social dissatisfaction with the lack of employment opportunities.
Youth and women have been particularly affected by the lack of economic opportunity: Tunisia is one of the few countries where a higher level of education decreases employability, in particular for women. Youth and women, in inland areas, are affected to the greatest degree, and the resulting growing outward migration of youth from these regions poses a growing threat to Tunisia’s long term economic competitiveness.
Tunisia has continued to make progress in establishing a democratic governance system. The model of consensus-driven politics based on the ‘Pact de Carthage’ (2016), has created a greater degree of political stability and has allowed for gradual progress on implementation of the 2014 Constitution. Local elections are scheduled for May 2018, constituting a further significant step in the political transition process.
Tunisia’s growth performance in the post-Revolution period remains weak despite a modest acceleration in 2017. The political transition, recurrent social tensions, domestic security shocks, the political and security situation in the Middle East and North Africa (including in neighboring Libya), and delays in implementing the needed reforms have negatively affected the Tunisian economy. Economic growth averaged 1.5 percent post-Revolution compared to 4.5 percent in the five years before the Revolution. The economy grew by 1.9 percent in 2017 compared to 1.0 percent in 2016 and 1.1 percent in 2015.
Growth in 2017 was driven mainly by agriculture (+2.5 percent) and services (+4.1 percent), while industrial output and non-manufacturing industries (phosphate, oil and gas) have not fully recovered despite the depreciation of the Dinar, due to social movements in mining regions, low oil prices and reduced investment in prospecting. Moreover, the contribution of investment, exports and productivity to growth are significantly below their pre-Revolution levels.
Unemployment is high, particularly for youth and women, and in the interior regions, given limited progress towards greater job creation, one of the chief demands of the 2011 revolution. Unemployment has declined from its peak of 19 percent in 2011, right after the revolution, to 15.5 percent in 2017, but remains above pre-Revolution levels (13 percent in 2010).
This is despite a low labor force participation of around 50 percent, mainly due to the very weak participation of women (27 percent compared to 69 percent for men). This poor performance is driven by weak job creation in the post-revolution period. Following net job destruction in 2015 mostly stemming from the impact on tourism of the two terrorist attacks (-11,700 jobs), job creation picked up in 2016 and 2017 with a modest net job creation of 34,700 and 45,500 jobs respectively, while in comparison the working-age population (and the active population) increased by 80,000 individuals yearly on average (48,000) in 2016-17.
Tunisia faces large fiscal and external deficits and high debt. The fiscal deficit reached 6.1 percent of GDP in 2017, 1 percentage point of GDP above the initial budget, due mainly to higher wage bill spending. The current account deficit reached a record 10 percent of GDP in 2017 as export growth remained low compared to import growth, despite a gradual depreciation of the Dinar. Consequently, public and external debt reached respectively 73 and 80 percent of GDP (compared to 40 and 52 percent of GDP in 2010). With a widening current account deficit, depressed foreign direct investment (FDI – 1.8 percent of GDP in 2017 against 4 percent of GDP on average in 2008-10) and the large Central Bank interventions in the forex market, gross international reserves have continued to decrease, reaching 3.1 months of import by end-2017 (US$ 5.7 billion) and dropped below 90 days in February 2018.
Tunisia has in place an unconditional cash transfer program providing a social safety net (SSN) for vulnerable households which represent approximately eight percent of the population. 28 percent of the population also receives health care insurance cards through this program for subsidized services. Eligibility is based on a combination of categorical criteria and a variation of community-based targeting, determined by social worker interviews and local committees. However, targeting, information and monitoring of these programs is considered relatively weak. In addition, a large share of the working age population is either idle, unemployed, or working in low-quality jobs. In 2014, around one third of the youth population were categorized as Not in Employment, Education or Training (NEET).
Last Updated: Apr 18, 2018