Economy and Trade
Tunisia has a diverse economy, with important agricultural, mining, tourism, petroleum products, and manufacturing sectors. It also has one of Africa’s highest levels of GDP per capita.
Governmental control of economic affairs, while still significant, has gradually lessened over the past decade with increasing privatization, simplification of the tax structure, and a prudent approach to debt. Progressive social policies have also helped raise living conditions in Tunisia, relative to the region.
World Bank and IMF support, coupled with prudent economic policies implemented by the Tunisian government in the mid-1980s after a balance of payments crisis, has resulted in regular stable growth. Real growth has averaged almost 5% over the past decade, although Tunisia will need to reach even higher growth levels to create sufficient employment opportunities for its population.
The challenges ahead include privatizing industry, liberalizing the investment code to increase foreign investment, improving government efficiency, reducing the trade deficit, and reducing socioeconomic disparities in the impoverished south and west.
Economic Policy over 12 Months
Real growth, which averaged almost 5% over the past decade, is set to decline in 2009 because of economic contraction and slowing of import demand in Europe, Tunisia’s largest export market. However, development of non-textile manufacturing, a recovery in agricultural production, and strong growth in the services sector have mitigated the economic effect of slowing exports.
Tunisia’s 11th development plan, called “Towards a new level of growth,” covers the period 2007–2011. In terms of macroeconomic policy, it is aiming for an average budget deficit of 2.5% of GDP (not including privatizations), an average current deficit of 2.6% of GDP and external indebtedness at 39.1% of available revenue by 2011, as well as for an average inflation rate in the range of 2.8% per year.
The active, but prudent policy of opening up the country’s economy, accompanied by support and incentives for businesses and industry, made it possible to successfully establish the Tunisia–EU Free Trade Zone in January 2008. There was a significant amount of progress towards greater privatization and liberalization in 2008. In the 2009 budget, the government increased its spending plans by 12% to above US$12 billion, on the back of US$1.75 billion in foreign investment flows and a GDP growth rate of 5%.
Tunisia has also entered into a new phase of opening up its economy, in order to diversify its exports and trading partners: the European Union, with 80% of exports, is its leading partner. The global financial crisis is expected to have an impact on the real economy, and sustaining investment will be critical if the country is to achieve the growth target of 5% in 2009.
The central bank is moving from direct management of the financial sector towards a more traditional supervisory and regulatory role. Commercial banks are permitted to participate in the forward foreign-exchange market. The dinar is convertible for current account transactions, but some convertible dinar/foreign-exchange account transactions still require central bank authorization. Total convertibility of the Tunisian dinar is probably still some years away. The dinar is traded on an intra-bank market around a managed float established by the central bank (based upon a basket of the euro, the US dollar and the Japanese yen).
In 2008, Tunisia concluded agreements with the World Bank, the European Development Bank, and the African Bank to increase the amount of funding for its projects.
Economic Performance over 12 Months
On a macroeconomic level, Tunisia has posted healthy growth numbers while managing to keep a lid on inflation. GDP growth in 2008 stood at 3.5%, down from 6.3% in 2007, but a strong showing nonetheless, particularly given the slowdown in the Eurozone, Tunisia’s largest trading bloc, and despite a disappointing agricultural season, and a decrease in hydrocarbon and mining production. Furthermore, despite massive rises in commodity prices—from building materials to foodstuffs—inflation came in at a modest 5%, compared to record price rises in excess of 12% in other countries in the region, such as Egypt or Jordan. In February 2009, the central bank said that it expected the economy to expand by 0.5% in 2009, from 3.4% in 2008.
Tunisia’s domestic banking sector, which has faced a number of problems in recent years, posted impressive numbers for 2008. The banking sector’s fundamentals appear to be steadily improving. An IMF report in July 2008 declared that the sector has been increasingly aggressive in improving the sustainability of its lending practices, with a decline of more than seven percentage points in bad loans since 2004. Tunisia’s banking sector still often serves as the private sector’s lender of first resort, but local enterprises are increasingly turning to capital markets as a source of financing. The volume of foreign investments in Tunisia increased from TND2 billion in 2007 to TND3.1 billion dinars in 2008.
Tunisia’s more traditional industries have also been showing strong growth. Despite the slowdown in its European markets, tourism, one of Tunisia’s key economic sectors and the country’s second-largest employer after agriculture, grew steadily over the first nine months of 2008, with record revenues expected by the end of the year. Official figures released in October showed that Tunisia’s tourism revenues rose by 9% year-on-year to approximately US$1.8 billion for the first nine months of 2008.
The physical appearance of the country is changing rapidly as well, with a set of colossal real-estate and infrastructure projects planned. They include a new US$700m airport, and a US$2bn deepwater port in nearby Enfidha, both of which will help increase the republic’s transit links with neighboring countries. Work has also begun on a new regional railway network, as well as on numerous roads, hotels, and tourist resorts along the Mediterranean coast.
Support for Inward Investment and Imports
Tunisia has made efforts to diversify its economy, to establish a stringent regulatory framework, and to improve its risk rating to attract foreign investors. Tunisia is emerging as a bridge between Europe and North Africa for many foreign investors, in particular those from the Gulf Cooperation Council. Information on investing in Tunisia is available from the Invest in Tunisia website.
Tax Exemptions
Tunisia has enacted several laws to encourage foreign investment in the industrial, services, finance, and tourism sectors. Various incentives are provided (exemptions, reduced rates, financial support, investment bonuses, a full tax allowance, etc.) through the Investment Incentives code.
Statistics
GDP growth: 3.4% (2008, Central Bank)
GDP per capita: US$8,000 (2008, est.)
CPI: 4.1% (December 2008, Central Bank)
Key interest rate: 4.5% (February 2009, Central Bank)
Exchange rate versus dollar: Tunisian dinars per US dollar—1.211 (2008, est.)
Unemployment: 14% (2008, est.)
FDI: US$28.51 billion (2008, est.)
Current account deficit/surplus: −US$993 million (2008, est.)
Population: 10,383,577 (July 2008, est.)
Source: CIA World Factbook except where stated
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