Country Report Tunisia November 2008

Outlook for 2009-10

• The president, Zine el-Abidine Ben Ali, will 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 expect GDP growth to slow to 4% in 2009, recovering only slightly to 4.5% in 2010, given the weak outlook for Tunisia's main trading partners in the EU.
• With oil prices falling sharply, inflation is likely to ease. We expect average annual inflation to decline to 3.8% in 2009, still above the government's 3% target, and to 2.9% in 2010.
• The current-account deficit is expected to remain at an average of above 2% of GDP in 2009-10, as export earnings and import spending contract initially as a result of the global economic slowdown, and tourism receipts also decline.

Monthly review

• Recent personnel changes at the highest level of the regime that brought younger politicians to greater prominence have revived speculation about who will succeed the president.
• In October, 14 people were jailed for planning terrorist attacksthe latest of almost 160 people imprisoned on terrorism charges over the past year.
• The authorities have expressed confidence in the ability of the Tunisian financial system to withstand the global financial crisis.
• New data have shown that the economy grew buoyantly to the end of the third quarter, with both foreign and domestic demand remaining strong. Even so, it is clear that investor confidence has begun to falter in late 2008.
• Eight firms have pre-qualified to bid for the build-operate-transfer (BOT) concession for the deepwater port at Enfidha.
• New official data have shown that export earnings and import spending grew by 26% and 25% year on year respectively in January-September 2008.
• The current-account deficit widened to TD945m (US$760m) in the first eight months of 2008half as large again as the deficit in the same period of 2007 and the equivalent of around 3% of projected GDP on an annualised basis.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;1;49;70;47;59
NAICS Code: 52;11;22;72;48;44