Country Forecast Tunisia February 2013 Updater

Country Forecast Tunisia February 2013 Updater

Overview

The establishment of a permanent government after elections in mid-2013 will be no guarantee of stability if the economic situation does not improve. The government that emerges from the next elections is likely to be another coalition led by Hizb al-Nahda. Secular parties in the coalition would temper the post-election government's Islamist-leaning policies. The downside of another coalition government is that establishing the clear policy lines wanted by local business and foreign investors will be more difficult. The government is expected to pursue an expansionary fiscal policy in 2013­14. The budget deficit will average 4.4% of GDP in 2013-17, but will trend lower as the forecast period progresses. Real GDP growth will remain relatively weak in 2013-14 owing to worsening domestic unrest and a deteriorating trade profile. Growth will be stronger from 2015 onwards, averaging close to 5% in 2015-17. Inflation will subside during 2013-15, aided by an easing in global commodity prices, but upward price pressures stemming from higher oil prices are likely to reverse this decline in 2016-17. We expect the current account to remain in deficit in 2013-17 as a persistent trade deficit is only partly offset by an improving non-merchandise position in the latter half of the forecast period.

Key changes from last month

Political outlook

The assassination on February 6th of Chokri Belaid, a prominent opposition leader, has intensified the political crisis, leading to divisions in the governing coalition and spurring the biggest street protests since the 2011 revolution.

Economic policy outlook

The coalition government has been forced to deny that it is planning to increase the price of subsidised foods in order to reduce the budget deficit.

Economic forecast

Social unrest is having an economic impact on phosphate production, where production remains well below pre-revolution levels.

Do to the nature of this product there is no table of contents.