Tunisia: Domestic and external factors weigh on the outlook

Country Report

Tunisia is gradually exiting a period of very low growth. 2011, the post-revolution crisis year saw GDP growth plummeting to -1.9%. But the economy suffered a double dip, as growth was also subdued in 2015 (+0.8%).

The ongoing recovery is tepid. The political transition, as elsewhere in the region, remains fragile, although on a firmer footing, and GDP growth reflects the uncertain political trajectory. Job prospects and general living standards have not improved significantly while past terrorist acts continue to undermine commercial activity. As a result, demonstrations are still a risk.

Moreover, the economic recovery in Europe, which accounts for 80% of overall foreign trade and over 50% of tourist numbers and receipts, is still tepid,  particularly in France and Italy where GDP growth stood at +1.1% and +1% in 2016. As a result, important investment and tourism flows - accounting for 14% of GDP, 12% of the labour force and 20% of FX earnings - remain weak. 

GDP growth climbed by a humble +1.3% in 2016 and should accelerate at a modest pace to +2% in 2017 and +2.5% in 2018. Moreover, political and social risks are weighing on external accounts. The current account deficit deteriorated from -2.8% of GDP to -9.1% in 2014 and improved only marginally since then (-8.3% of GDP in 2016). Deficits require careful management as revenue generation relies on a period of stability and enhanced security.