Tunisia’s political transition made steady progress in 2014, overcoming political deadlock to adopt a new constitution, and holding both parliamentary and presidential elections. The national dialogue platform, brokered by key civil society organizations, played a crucial role in building consensus among all major political parties. This resulted in the adoption of a consensual roadmap that paved the way for the general elections which took place peacefully at the end of 2014. The political transition concluded in 2015 with a new government beginning a five-year term and taking the lead in meeting Tunisia’s security and economic challenges.
After a short-lived rebound in 2012, the increasing political and social instability, as well as the difficult external environment, that characterized most of 2013-2014, had 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, slowed down to 2.6% in 2013 and the Bank estimates that for 2014 growth will remain modest at 2.2%. Unemployment remains at 15.3% from 16.7% in 2011, 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. The government had a deficit target of 5.1% of GDP in 2014 which will be missed as fiscal revenues were restrained by subdued growth, both domestically and in the country's main trading partners in Europe. For 2013, the deficit has reached 6% and should remain at that level in 2014. A tightening of monetary policies 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 reaching 6.3% one year earlier.
The external current account deficit remained large for most of 2013 and is estimated to have increased to 9.4% of GDP. The trade balance deficit widened from 10.3% of GDP in 2011 to 13.4% in 2012. The impact of the trade and income deficits on the current account will be partly offset by a surplus in services; the number of tourists visiting Tunisia is forecast to rise after the slump caused by the revolution in 2011, but growth continues to reflect weakness in European demand. 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 country’s political crisis.
Last Updated: Apr 06, 2015