Country Report Tunisia September 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, which could lead to power struggles within the ruling RCD.
• 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.
• 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 5.3% of GDP in 2009-10.
• We forecast that GDP growth will slow in 2009 to 0.7%, and that it will pick up only modestly in 2010, to 1.8%, reflecting the gloomy outlook for the EU.
• The current-account deficit will narrow in 2009, as both imports and exports decline, falling to 3.1% of GDP. It will narrow again in 2010 to 2.8% of GDP, mainly as a consequence of growing nominal GDP.

Monthly review

• Mr Ben Ali, has submitted his nomination for the presidential election that will take place (alongside a legislative election) on October 25th.
• A senior opposition figure has pulled out of the election and the authorities have stifled opposition criticism.
• The central bank has released a report that suggests the brunt of the financial crisis has been avoided. The bank's governor has praised government policy, but whether the government deserves the credit is debatable.
• The government has decided that it will invite selected international firms to bid for a long-awaited major power plant concession following a period in which the continuation of the US$2bn project was in doubt.
• The rate of contraction in production in the manufacturing sector has slowed, as has the decline in manufacturing exports. The textile sector has made adjustments to compensate for the changing global economic environment.
• The performance of other sectors has been mixed. Agricultural growth has been strong, mining and energy have been boosted by price rises in oil and phosphates, but the tourism sector has been disappointing.

This report covers the following industry codes:
SIC Code: 48;60
NAICS Code: 517;52