Tunisia’s Economic Outlook- April 2017

Tunisia has made great strides to advance its political transition but tangible economic dividends are taking longer than expected with growth too low to significantly make a dent in unemployment amid widening fiscal and current account deficits. A national unity government - a coalition of the main political parties and civil society groups - was formed in September 2016 to tackle the urgent economic reforms but has undergone its first, albeit minor, cabinet reshuffle in February 2017.

Tunisia’s economy grew at an estimated annual rate of 1.0% in 2016 (2.0% excluding agriculture and fisheries) compared to 1.1% in 2015 (0.1% excluding agriculture). Growth in 2016 was driven mainly by the tradable services sector and the non-tradable activities sector, which grew each by 2.7% as well as the manufacturing industries sector (+0.9%).

Economic growth is projected to accelerate to 2.3% in 2017 through the recovery of the strategic sectors of agriculture, phosphate and manufacturing. In the medium term, economic growth is projected to pick up gradually to 2.8% in 2018 and 3.2% in 2019 against a backdrop of improved business climate through structural reforms and greater security and social stability. The fiscal deficit is expected to remain high at 5.9% of GDP in 2017. Fiscal sustainability will require reining in the public wage bill, expanding the tax base, and creating space for increased investment spending.