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 to raise living conditions in Tunisia, relative to the region.
World Bank and International Monetary Fund (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 more stable growth. Real growth has averaged almost 5% over the past decade, although it fell substantially in 2009, reflecting lower levels of economic activity both at home and in Europe.
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
Sound economic policies and structural reforms underpinned by increasing trade openness allowed Tunisia to record higher growth in recent years and strengthen its footing to face the current global crisis, according to an IMF report published in December 2009. The report added that Tunisia enhanced its resilience with reduced public and external indebtedness and a largely improved reserves position. The Tunisian economy was relatively insulated from international financial contagion, but it is exposed to the slowdown in economic activity in its partner countries, particularly in Europe.
Tunisia’s 11th development plan, called Towards a New Level of Growth, covers the period 2007–11. 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. A significant amount of progress toward greater privatization and liberalization has been achieved in recent years. In the 2010 budget, the government maintained the fiscal stimulus unveiled in 2009. It increased its spending plans by 5% and the government set more money aside for development projects.
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 central bank is moving from direct management of the financial sector toward 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).
Economic Performance over 12 Months
Real growth, which averaged almost 5% over the past decade, declined to 4.6% in 2008 and to 0.3% in 2009 because of a domestic economic contraction and slowing of exports. However, development of nontextile manufacturing, a recovery in agricultural production, and strong growth in the services sector somewhat mitigated the economic effect of slowing exports. The slowdown in growth in 2009 is unsurprising given economic weakness in the eurozone, Tunisia’s largest trading bloc. However, the IMF, in its World Economic Outlook published in April 2010, said that Tunisia was emerging strongly from the slowdown and that the economy would expand by up to 4% in 2010 and up to 5.5% in 2011, “assuming exports, tourism, remittances, and foreign direct investment continue to improve.”
Domestic demand was sustained by investment and strong consumption fueled by salary increases. Inflation declined from an average of 5% in 2008 to 3.7% (year on year) in 2009 “due to the fall in global food and fuel prices and an appropriate monetary policy,” according to the IMF.
Tunisia’s domestic banking sector, which has faced a number of problems in recent years, was not directly affected by the global financial crisis since it relies only slightly on external financing, and profitability increased in 2008, which contributed to a buoyant stock market. Credit to the economy further increased in the first quarter of 2009. Banks’ soundness indicators continued to improve in 2008, but the level of nonperforming loans remains relatively high, according to the IMF.
The current account deficit, after widening in 2008, contracted in 2009 thanks to lower import prices and resilient tourism and remittances receipts. Despite somewhat smaller foreign investment inflows in early 2009, reserves reached US$9 billion at the end of May 2009 (5.6 months of projected imports).
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$700 million airport, and a US$2 billion deepwater port in nearby Enfidha, both of which will help to 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. The country is emerging as a bridge between Europe and North Africa for many foreign investors, in particular those from the Gulf Cooperation Council (GCC). Information on investing in Tunisia is available from the Invest in Tunisia website.
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.
GDP growth: 0.3% (central bank, 2009)
GDP per capita: US$8,000 (2009 est.)
CPI: 3.7% (2009 est.)
Key interest rate: 4.5% (central bank, February 2009)
Exchange rate versus US dollar: DT1.3494 (2009)*
Unemployment rate: 14.7% (2009 est.)
FDI: US$30.8 billion (2009 est.)
Current account deficit/surplus: −US$1.12 billion (2009 est.)
Population: 10,589,025 (July 2010 est.)
* Tunisian dinar
Source: CIA World Factbook except where stated