Country Report Tunisia May 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 1%, and that it will pick up only modestly in 2010, to 2.6%, 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 import and export earnings decline, falling to 1.9% of GDP. It will widen modestly in 2010 as import costs rise at a faster pace than export earnings.

Monthly review

• The French prime minister's visit to Tunisia in April helped repair relations between the two countries, secure numerous commercial agreements and obtain assurances of a fair contest in the elections in October 2009.
• The government has stepped up pressure on opposition politicians and journalists as the elections have drawn nearer, with a number of reports of harassment.
• Government forecasts of economic growth and the budget deficit appear optimistic compared with forecasts from the Economist Intelligence Unit.
• A fall in export earnings has led to a contraction in industrial output, which has been partly offset by expansion in the energy and agricultural sectors.
• The prospects for the services sector have remained uncertain as planned government expenditure has increased and tourism receipts from recessionary Europe have fallen.
• A decline in foreign investment inflows has been partly offset by an increase in public loan and portfolio inflows.

Source: Country Report

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