As the COVID-19 pandemic stretches into 2021 and in a context of heightened socio-political unrest, Tunisia’s growth and fiscal outlook is weaker than before. The recovery will require more stability and a joint national effort to steer the economy to the right path.
Real GDP contracted by 8.8% in 2020 as sharp declines in domestic and external demand followed the pandemic. With a 9.3% contraction, manufacturing, a mainstay of the Tunisian economy, was deeply impacted. An 80% decline in passenger arrivals also caused a downturn in tourism and transport. Notably, business pulse surveys indicate that almost a quarter of formal firms (23.6%), mainly in the services sector, were either temporarily or permanently closed by the end of 2020. This has had a knock-on effect on unemployment, which stood at 17.4% by end 2020, compared with 14.9% pre-pandemic.
The uptick is, however, not large enough to return output to pre-pandemic levels of 2019. After this short-term rise, growth is expected to return to a more subdued trajectory, expanding by around 2% by 2023, reflecting pre-existing structural weaknesses and a gradual global recovery from the pandemic. These estimates are presented with significant downside risks. The pace of the recovery will depend on the extent of the pandemic in 2021, vaccine rollout in Tunisia and key trading partners as well as measures to mitigate the pandemic’s impact on households and firms.