Economy

The Tunisian economy, like all economies around the world, is marked by large-scale events profoundly changing its growth trajectory. If the years 2020 and 2021 were dominated, in large part, by the Covid epidemic and the health and budgetary responses, with cascading consequences on global supply chains, 2022-2023 were the years of the crisis energy, the war in Ukraine and the return of inflation. Tunisia seems to be struggling economically and socially and the country has shown signs of increasing fragility in the face of successive shocks.

The economic and social model seems to have little resilience and no longer meets the aspirations of citizens. Public debt has exceeded the 100% of GDP mark, unemployment has remained at its highest level, inflation is in double digits (nearly 10% at the start of 2023) and the outlook, according to rating agencies, are negative.

Weakened economic fundamentals

Economic growth in Tunisia has been at half mast for a long period. Over the decade 2012-2021, GDP increased by an average of 1%. GDP fell by 9.2% in 2020, the strongest in the Mena region during the Covid-19 crisis, demonstrating the fragility of this economy (World Bank, 2022). The informal economy has grown significantly and now represents nearly 50% of the Tunisian economy and provides 44.8% of jobs. Stagflation, characterized by the coexistence of high unemployment and high inflation, has taken hold in Tunisia. Inflation will accelerate in 2023, reaching almost 10% today. This inflation is both the result of a tense international context for raw materials, but also the witness of an economic dysfunction (rental economy without real competition). Tunisian public debt has become unsustainable in the space of a decade. The country’s sovereign rating has been downgraded nine times and Tunisia is struggling to meet its budgets these days. This situation weighs on the State’s capacity to finance its budgets. The persistence of the drought for the fourth consecutive year and the slowdown in the global economy also marked the achievements of the first eight months of 2023, including limited growth in GDP, the continued decline in investment and an increase unemployment. The balance of payments recorded a certain easing under the effect of the improvement in the trade balance situation and the strong increase in tourist receipts but at the cost of the slowdown in growth and the fall in investment. The State budget experienced a temporary improvement since the balanced budget for the whole of 2023 required the adoption of a complementary finance law. Growth continues to be on a weak path which is certainly explained by cyclical, internal and external factors (slowdown in global growth, drought) but also by structural factors including in particular the drop in potential growth resulting from the low level of investment. Remember that GDP has recorded a decline in growth of 0.6% on average per year since the pandemic (2019-2022).

For the whole of 2023, growth is revised, as part of the 2024 Economic Budget project, to 0.9% compared to 1.8% initially planned. “However, taking into account the evolution of GDP over the first nine months, this level seems difficult to reach,” according to the BCT. According to INS statistics, inflation started to fall once more in September, reaching 9% (compared to 9.3% in August). This decline in inflation is due to the deceleration in the rate of price increases between September and August this year compared to the same period last year. Indeed, a decline is observed in the annual rate of increase in prices for the “food products” group, going from 15.3% to 13.9%.

Declining economic growth

For the whole of 2023, the forecast for economic growth has been revised downwards, to be limited to 0.9% compared to an initial forecast of 1.8%. This expected slowdown is explained by a multitude of factors, in particular the low rainfall for the fourth consecutive year, considerably affecting agricultural production, the continued contraction of extractive production, in addition to the reduction in demand emanating from the Euro zone affecting exporting manufacturing industries, particularly the textile and clothing sector. On the other hand, growth should benefit from the good performance of certain sectors such as tourism and the mechanical and electrical industries. In its latest Monitoring Report on Tunisia’s economic situation, the World Bank indicates that positive developments have been recorded, such as “improved trade and a recovery in the tourism sector, but GDP growth for the year 2023 is forecast at around 1.2%. For her, this is a “moderate recovery in comparison with neighboring countries in the region and half the growth rate of the year 2022”. The report specifies that a growth forecast of 3% in 2024 remains subject to risks linked to changes in drought, financing conditions and the pace of reforms. “Tourism receipts saw an increase of 47% until the end of August 2023, which, combined with transport services, contributed 0.8 percentage points to overall GDP growth, helping to reduce the current account deficit.

“Despite persistent challenges, the Tunisian economy shows a certain resilience. Increased exports from the textile sector, mechanical industries and olive oil, combined with growth in tourism exports, have helped to alleviate the external deficit, says Alexandre Arrobbio, World Bank Resident Representative for Tunisia . Strengthening competition, improving fiscal space and adapting to climate change are essential measures to restore economic growth and build resilience to future economic and climate shocks,” he said. added. The price control system that governs major commodity markets is a key factor in the growing debt of state-owned enterprises and the resulting shortages.