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publication April 16, 2020

Tunisia's Economic Update — April 2020

Cars circle a roundabout on Habib Bourguiba Avenue in Tunisia.

Download Tunisia report: English


The new government faces an economic situation that is highly vulnerable to a deterioration of the global economy due to the coronavirus pandemic and volatile oil prices. Tunisia has high twin deficits and debt, and limited buffers, whereas growth is anemic, employment stagnant and inflation relatively high. 

A worsening pandemic would negatively impact tourism; exports and domestic demand, and consequently growth; employment; and household vulnerability. A sharp reversal of recent oil price dynamics would exacerbate current account and fiscal pressures.

The economy is projected to contract by 4% in 2020 in a scenario where COVID-19 spreads globally with disruptions to travel and trade, as well as social distancing behaviors, all of which impact economic growth. This forecast assumes 2 to 3 months of social distancing, travel restrictions over the summer resulting in a large contraction of the tourism sector, and the gradual coming online of the Nawara field. The outlook is subject to major downside risks related mainly to the coronavirus pandemic. 

Inflation is expected to continue declining under an outlook of lower oil prices and a continued tight monetary policy. Inflation pressures could rise in the scenario of continued disruption of trade flows with Europe and China which could force importers to adjust their supply chains and procure in potentially higher cost countries. Poverty is projected to go above 3% in 2020 using the 3.2 U$ PPP per day line and around 0.3% using the international poverty line.

The key risks facing Tunisia relate to the COVID-19 pandemic and the volatility in global oil prices. A worsening of the global pandemic would result in a further deterioration of the global economic outlook, a persistent disruption in global trade and value chains, as well as longer than expected global and Tunisia-specific restrictions to travel and activity combined with social distancing behavior that would lower domestic consumption. This would adversely affect economic activity in Tunisia and in particular tourism and exports, thereby leading to an additional slowdown in growth, job creation, and government revenue, as well as potential price increases of imported goods leading to higher inflation. This along with a potential reduction in FDI and remittances due to the pandemic would have knock-on effects on the fiscal and current account balances and the foreign reserve position. 

A reversal of the recent drop in global oil prices would affect fiscal and external accounts. A disruption of global financial markets and the economic situation in a few oil exporting MENA countries could increase difficulties to finance fiscal and external balance deficits, but Tunisia remains mostly dependent on multilateral financing. Domestically, there are additional risks relating to reform continuity (in light of recent elections and the installation of a new government), socio-political tensions, and a deterioration in security which would adversely impact investment and tourism. Spillovers of instability in neighboring countries could affect economic stability.