Country Report Tunisia June 2009

Outlook for 2009-10

• The president, Zine el-Abidine Ben Ali, and his party, the Rassemblement constitutionnel democratique (RCD), are unlikely to face any serious competition in the 2009 elections and are almost certain to be re-elected.
• Following the elections, Mr Ben Ali is likely to begin to groom a successor, and power struggles within the ruling RCD will intensify.
• Despite recent protests over unemployment and rising food prices, the government is expected 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.
• The Economist Intelligence Unit forecasts that GDP growth will slow in 2009 to 0.6%, and that it will pick up only modestly in 2010, to 2.3%, reflecting the gloomy outlook for the EU.
• We expect the fiscal position to deteriorate, given weakening revenue growth and a budgeted 12.5% rise in spending aimed at stimulating consumption. The fiscal deficit is forecast to widen to an average of 5.1% of GDP in 2009-10.
• The current-account deficit will narrow in 2009, as both imports and exports decline, falling to 1.7% of GDP. It will widen in 2010 to 3.5% of GDP as import costs rise at a faster pace than export earnings.

Monthly review

• The only opposition candidate standing in the October presidential election to be openly critical of Mr Ben Ali has complained about restricted access to Tunisian television, undermining hopes for fair treatment of the candidates.
• The latest in a series of terrorism trials has taken place, with 17 men convicted of various offences. The ongoing trials indicate that the government is concerned about a terrorist threat developing.
• Only two firms have bid for the new telecoms licences for fixed-line and mobile-phone services, with the winner to be announced in June, despite 19? companies originally showing an interest.
• The slowdown in demand for Tunisian exports has had a negative impact on growth in export-led industrial sectors, with some job losses. The services and agricultural sectors have experienced reasonable growth.
• The latest trade figures show a drop in the value of merchandise exports and imports. However, improvements in the income and services accounts have led to better than expected figures for the current account.

This report covers the following industry codes:
SIC Code: 48
NAICS Code: 517