Tunisia’s GDP growth to remain subdued at 2.8% in 2014 – IMF

By bne IntelliNews March 25, 2014

Tunisia’s GDP growth will remain muted at 2.8% in 2014 despite edging up from an estimated 2.6% the year before as the economic situation remains “very fragile” with a growth rate that is too low to meet the population’s high social aspirations, the IMF said in a statement. The latter followed an IMF visit to conduct the third review of Tunisia’s economic and reform programme supported by a 24-month Stand-By Arrangement (SBA). The successful review will allow for the disbursement of USD 225mn to Tunisia, the IMF said.

The fund underscored the significant progress made at the political level in Tunisia, paving the way for clearer prospects that could help reduce investors’ ‘wait-and-see’ attitude.

Tunisia's 2013 GDP growth was supported mainly by public and private services, according to the IMF. The country's current account deficit widened to 8.4% of GDP in 2013, as a result of weak exports of phosphates and low tourism proceeds coupled with weak external demand for Tunisian goods. The CA gap will likely narrow to 7.2% of GDP in 2014, the IMF forecasts.

As to the budget deficit, it narrowed to 4.5% of GDP in 2013 (on a cash basis, excluding grants and privatisation receipts), from 5.0% of GDP in 2012. The smaller budget gap in 2013, however, was attributable mainly to the deferral to 2014 of the settlement of some payment orders issued in 2013, the IMF argued.  The significant under-execution of investment spending, linked to absorptive capacity constraints, also helped narrow the budget gap in 2013, the IMF said.

The deferral of expenditures will, however, weigh on the budget deficit (on a cash basis), which will widen to 8% of GDP in 2014 and will mainly be financed through external sources, the IMF forecasts.

Short-term risks to the Tunisian economic outlook remain significant, especially in case of a prolonged political transition period, heightened security tensions, or a worsening of the economic outlook for Tunisia’s main trading partners, the IMF warned.

In order to tackle major challenges facing Tunisia, urgent action is needed to cap the fiscal and external deficits, reduce the banking sector’s increasing vulnerabilities, and generate more rapid and inclusive growth. The latter can help absorb unemployment and reduce social and economic disparities, the IMF noted.

The implementation of a tight monetary policy and a more flexible exchange rate policy are also crucial to preserve macroeconomic stability, according to the IMF. 

Related Articles

UAE to buy major stakes in Kazakh special economic zones

The United Arab Emirates’ (UAE’s) global port operator Dubai Ports World on March 24 signed two framework agreements to acquire stakes in Kazakhstan’s two Special Economic ... more

Survival of Iran nuclear deal appears far less likely under US Secretary of State Mike Pompeo

The odds on the Trump administration attempting to kill the Iran nuclear deal substantially shortened on March 13 with the firing-by-tweet of US Secretary of State Rex Tillerson and his replacement ... more

Billion-dollar petrochemical facility to be built in Turkey by Algeria's Sonatrach

Algerian national energy company Sonatrach has struck a deal with Turkey's Ronesans and Bayegan to build a petrochemical plant worth $1bn in Turkey, Turkish President Recep Tayyip Erdogan said on ... more