Country Report Tunisia February 2009

Outlook for 2009-10

• The president, Zine el-Abidine Ben Ali, is unlikely to face any serious competition in the 2009 election and is therefore almost certain to be re-elected. 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.
• GDP growth will slow in 2009 to 2.8%, picking up slightly in 2010 to 3.9%, reflecting the gloomy 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, falling to 1.5% of GDP. It will widen modestly in 2010.

Monthly review

• Mr Ben Ali has expressed his support for the Palestinians, but has avoided praising Hamas, a Palestinian Islamist group. His security services have placed strict curbs on public demonstrations in support of the Palestinians.
• In response to lower international oil prices, the government has reduced the price of fuel by 3.8%.
• The government has invited international bids for a new telecommunications licence and 13 international companies have expressed an interest.
• Industrial production data to end-November have shown that industrial activity slowed markedly towards the end of 2008.
• The global economic slowdown has hit economic prospects for 2009, and ministers have warned businesses to prepare for a sustained slump in demand from Tunisia's largest export market, the EU.
• The deteriorating economic landscape has resulted in a widened current-account deficit, which Banque centrale de Tunisie (the central bank) estimates reached TD2.2bn in 2008, compared with TD1.2bn in 2007.

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