Country Report Tunisia January 2009

Outlook for 2009-10

• The president, Zine el-Abidine Ben Ali, is certain to 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 2.8% in 2009 and to 3.9% 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

• Three opposition leaders have announced their candidacy in the upcoming presidential election in October 2009.
• A senior member of the banned Islamist party, Hizb al-Nahda, has been sent back to jail for "speaking in the name of a banned party" after only having been released a month earlier.
• A French court has found a Tunisian diplomattried in absentiaguilty of torture, in a case described by the Tunisian government as a "fabrication".
• Tunisia has started to feel the effects of the global economic downturn, with export earnings falling, investment tailing off and access to project finance being squeezed.
• Groupe chimique, the state-owned fertiliser manufacturer, has halted production at three phosphate plants, as falling demand has prompted a sharp fall in prices.
• Inflation eased in 2008, from 5.3% at end-2007 to 4.2% at end-2008.
• The trade deficit widened in 2008 as growth in export values fell in real terms in the last two months of the year and as import costs remained high.

Source: Country Report