Country Forecast Tunisia November 2012 Updater

Country Forecast Tunisia November 2012 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-tending 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 2013 14. The budget deficit will average 5.3% 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 pressure 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

After months of internal negotiations the three parties making up the coalition government have agreed that a parliamentary election and the first round of the presidential election will both be held on June 23rd 2013.

Economic policy outlook

The government is continuing with its policy of negotiating loan guarantees with its international partners.

Economic forecast

The trade deficit widened by 49% year on year in the first nine months of 2012, putting further pressure on the external balances. Export growth was mostly held back by sluggish demand in the EU, a key market for Tunisia.

Please Note: Due to the Nature of This Report The Toc is Not Available