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Tunisia Country Risk Report Q1 2019

Tunisia Country Risk Report Q1 2019

We expect a modest acceleration of growth in 2019, as private consumption rebounds However, growth will remain structurally sluggish compared to historic highs Despite efforts by the government to enact structural reforms, political uncertainty ahead of the elections, security risks and social unrest will temper the pace of much needed investment inflows in the coming years

The government's budget deficits will see some small reductions over the coming years as the government moves forward with consolidation measures How-ever, the pace of consolidation will remain hampered by risks of social unrest, especially ahead of the 2019 election

The dinar will continue to depreciate over the next two years, owing to large external imbalances, elevated inflation and struggling foreign investment

The splintering of the governing coalition will undermine policymaking in the country, limiting scope for necessary, but painful macroeconomic adjustments Major Forecast Changes

We now forecast a budget deficit of 5 1% of GDP in 2019, from 4 9% previously The revision is largely due to reports that the government intends to raise public sector wages (after having previously indicated it planned to freeze wages in 2019)

Key Risks

Popular pressures and opposition from vested interests will continue to slow the pace of reform An elevated terrorist threat, amid porous borders with Libya, regional instability and domestic socio-economic grievances, will continue to pose strong security threats, and will be a major challenge for the government Nevertheless, we remain optimistic towards the country's transition to a relatively stable democracy

Domestic political instability will continue to weigh on business sentiment, limiting the recovery in fixed investment Faster growth is conditional on improve-ments in the regional security environment and the positive implementation of structural economic reforms, both of which will take time to materialise A more market-oriented public policy framework and the recapitalisation of the banking system will be key to attracting foreign direct investment and boosting domestic credit growth Tunisia Country Risk Q1 2019


Executive Summary
Core Views
Major Forecast Changes
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Tunisia To See Only Tepid Growth Gains In 2019
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Outlook On External Position
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
TABLE: BREAKDOWN OF IMPORTS IN 2017
TABLE: BREAKDOWN OF EXPORTS IN 2017
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Monetary Policy
Inflation To Accelerate In Tunisia In 2019
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
Elections Will Undercut Progress On Fiscal Consolidation In Tunisia
Structural Fiscal Position
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Tunisia Country Risk Q1 2019THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.Contents10-Year Forecast
The Tunisian Economy To 2027
Structural Reform Drive Positive; Political Risk Still Looming
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Political Outlook
Domestic Politics
Tunisia's Political Tensions To Increase As 2019 Elections Approach
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Democratic Consolidation To Remain A Challenge
Global Macro Outlook
Inflation And Policy Risks Rising
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS, REAL GDP GROWTH, % Y-O-Y
Index Tables
TABLE: TUNISIA – MACROECONOMIC DATA & FORECASTS

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