Country Forecast Tunisia January 2013 Updater

Country Forecast Tunisia January 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. We forecast that real GDP growth will be weaker than previously forecast 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 growing propensity of some political groups to resort to violence in pursuit of their aims is of significant concern.

Economic policy outlook

The government has set the 2013 budget at TD26.8bn (US$17.1bn), a rise of 4.9% on the 2012 budget, but, given relatively high inflation, about the same in real terms. A fiscal deficit of 5.9% of GDP is expected by the government.

Economic forecast

The economy grew by 3% in the first nine months of 2012. Agricultural production was buoyant in the third quarter, following good rainfall earlier in the year, and transport and tourism services performed well.

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