Tunisia’s political transition gained new momentum in early 2014, with the resolution of a political deadlock, the adoption of a new Constitution and the appointment of a new government. The national dialogue platform, brokered by key civil society organizations, played a crucial role in gathering all major political parties. This resulted in the adoption of a consensual roadmap leading to general elections, planned for the end of 2014. The strategic direction that the new government embarked upon focuses on restoring and maintaining security, while laying the ground for a stronger economic recovery which it sees as key to successfully completing the democratic transition.
After a short-lived rebound in 2012, the increasing political and social instability, as well as the difficult external environment, that characterized most of 2013, have led to a slowdown of economic growth. Rebounding from the contraction of 1.9% of GDP in 2011, the economy grew by 3.6% in 2012, somewhat above expectations. For 2013, growth is now estimated to have slowed down to 2.6%, as agricultural production and the oil and gas sector have declined markedly, while manufacturing stagnated. Unemployment continued to decline to 15.3% at the end of 2013, from 16.7% one year earlier, but still well above the pre-revolution level of 13%.
Post-revolutionary Governments have pursued expansionary fiscal and monetary policies until 2013 to support the economy and employment. For 2013, the deficit has reached 6%. A tightening of monetary as well as more moderate commodity prices have allowed for a slowdown in consumer price inflation, which slowed down to 5.5% in February 2014, after having culminated at 6.3% one year earlier.
The external current account deficit remained large for most of 2013 and is estimated to have hovered at similar levels than in 2012 (8.2% of GDP). The trade balance deficit widened from 10.3% of GDP in 2011 to 13.4% in 2012. Following a rebound in 2012, Foreign Direct Investment (FD) declined in 2013, in the context of persistent political uncertainty, and foreign exchange reserves have gradually declined until end 2013. Net FDI flows are therefore estimated to have declined to US$1.0 billion, compared to the US$1.7 billion reached in 2012. Some limited foreign exchange interventions continued in 2013, as pressures on the currency mounted, a persistently wide current account imbalance and lower than expected capital inflows have led to a reduction of reserves to about US$6.8 billion by end-2013 (or just equivalent to 3 months of imports of goods and services). Supported by only limited interventions of the Central Bank, the exchange rate has depreciated by about 11% vis-à-vis the Euro in 2013. In early 2014, both reserves and the currency recovered somewhat, on account of increased confidence after the resolution of the political crisis.