Tunisia’s Economic Outlook- October 2016

Five years after the Revolution, Tunisia’s economic performance remains weak, with growth too low to make a significant dent on unemployment, poverty and inequality amid widening fiscal and current account deficits. The Tunisian President’s recent call for a unity government has been supported by most political parties and civil society and followed by the formation of a new government in late August 2016. This initiative is intended to ease political bottlenecks and provide impetus to the much needed reforms to strengthen security, improve the business environment and restart growth.


The economy is projected to expand modestly by 2.0% in 2016 driven by rising public consumption (up 10.1%) as negotiated wage increases are enacted, and investment (up 4.5%). In the medium term, economic growth is projected to pick up to 3.0 and 3.7% in 2017 and 2018 respectively in a scenario that would combine the acceleration of structural reforms, the improvement of security at the national and regional level (most notably a start of normalization in Libya), greater social stability, and a moderate increase in external demand.

Lower fiscal revenues in H1 2016 were compensated by the sale of 4G licenses and the transfers of excess money held by the Central Bank of Tunisia. But energy subsidies and net transfers to the State oil refining company have increased by 0.1 percentage points of GDP. Moreover about 0.6% of GDP were transferred to the State pension fund, which is structurally in deficit, to cover its liquidity needs. Overall the data for the first half of the year indicate that the fiscal deficit could be 1% percentage point of GDP higher than initially budgeted (4.6% of GDP) if no compensatory measures are implemented to keep the structural deficit below 4% (benchmark of the new IMF Extended Fund Facility). In the medium term, reining in the public wage bill and expanding the tax base are critical for fiscal sustainability and to create the space for more investment spending.

On the external side, the current account deficit is projected to drop to 7.7% of GDP in 2016, with the decline in imports partially offset by the fall in exports. In the medium term the current account is likely to benefit from the gradual recovery of remittances and services trade and would decline gradually toward 6.4% of GDP in 2017-18.

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