Country Report Tunisia December 2008

Outlook for 2009-10

• The president, Zine el-Abidine Ben Ali, will be re-elected in the 2009 election when he is unlikely to face any serious competition. He is subsequently likely to begin to groom a successor.
• Despite recent protests over unemployment and rising food prices, we expect the government to be able to maintain social stability, although it will prove challenging, particularly given the constraints on fiscal outlays.
• The global financial crisis and its wider economic fallout are likely to make the government even more cautious than it has traditionally been when it comes to economic reform.
• We have revised down GDP growth to 3.6% in 2009 and to 4.2% in 2010, owing to the gloomier outlook for the EU.
• We expect the fiscal position to deteriorate, given a budgeted 12.5% rise in spending aimed at stimulating consumption. The fiscal deficit is forecast to widen to 3.9% in 2009, before easing to 3.7% in 2010.
• The current-account deficit will narrow in 2009, as both import and export earnings decline, but will remain sizeable at 2.4% of GDP. It will widen modestly in 2010.

Monthly review

• In a speech marking his 21st year in power, Mr Ben Ali promised to expand democracy, a pledge that is unlikely to carry much weight with most Tunisians.
• Mr Ben Ali's pledge to allow the opposition greater media access during campaigning has been undermined by government moves to close down an opposition newspaper.
• Mr Ben Ali ordered the release of 21 Islamist prisoners, most of whom were members of Hizb al-Nahda, a move that was seen as a signal that the government no longer views the Islamist group as a threat.
• The prime minister presented the 2009 budget to parliament in late November. The budget projects that the fiscal deficit will not exceed 3% of GDP, despite a budgeted 12.5% rise in public spending.
• Although the economy continued to grow in the third quarter of 2008, the government has warned of an imminent slowdown, on account of the global financial crisis.
• The growth in export earnings was almost matched by the increase in import costs in the first ten months of 2008, but with only a small rise in the non-merchandise surplus, the current-account deficit widened.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;49
NAICS Code: 52;22