Country Report Tunisia March 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 2.4%, picking up slightly in 2010 to 3.7%, 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 and the weakening of revenue growth. The fiscal deficit is forecast to widen to 4.1% of GDP in 2009-10.
• The current-account deficit will narrow in 2009, as both import and export earnings decline, falling to 1.3% of GDP. It will widen modestly in 2010.

Monthly review

• An appeal court has trimmed the jail sentences of demonstrators involved in protests in Gafsa in 2008, but has rejected defence pleas to overturn them. Despite the reduction, they remain harsh.
• The government has moved to suppress opposition media activity in the countdown to the elections later in the year. In separate cases, a radio station was closed down and three broadcast journalists were detained.
• In February the central bank reduced its key interest rate by 75 basis points, from 5.25% to 4.5%, citing the global economic slowdown and falling domestic inflation.
• The government has estimated that GDP growth fell from 6.3% in 2007 to 5% in 2008.
• Foreign direct investment (FDI) inflows grew by 50% to a record TD3.1bn (US$2.52bn) in 2008. The government hopes that FDI will remain buoyant in 2009, as the country establishes itself as a aeronautical manufacturing hub.
• The trade deficit widened in February to TD451m (US$367m), as exports slowed considerably on the back of falling demand.
• The current-account deficit widened to an estimated 4.5% of GDP in 2008, compared with the government target of 2.2%, as the trade deficit grew to a record TD5bn.

Source: Country Report

This report covers the following industry codes:
SIC Code: 49;59;39;2834;80
NAICS Code: 22;44;31;3254;62