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Tunisia Country Risk Report Q2 2015

Tunisia Country Risk Report Q2 2015

Core Views

Parliamentary and presidential elections took place in Q414, andwe believe that an investor-friendly government will be formed. Weare optimistic over the country's political trajectory even as threatsto the political transition, particularly those posed from the presenceof jihadist groups in the country, remain significant.

Tunisia's economic expansion will accelerate in 2015 as an improvingpolitical situation results in renewed business and consumerconfidence. An improvement in political stability will result in a returnof FDI from H215.

Major Forecast Changes

We have revised down our 2015 forecast for Tunisian real GDPgrowth to 3.4%, from 3.9% previously and compared to 2.4% growthin 2014. We project average real GDP growth of 3.7% over the nextfive years.


Executive Summary
Core Views
Major Forecast Changes
Key Risks To Outlook
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Secularist Prominence Following Presidential Vote
The presidential and parliamentary elections in Tunisia mark a return to prominence for the secularist political parties. We believe that
moderate Islamist Ennahda will not be marginalised even if it does not participate in the new government. Investor confidence will
improve despite slow policymaking, and Tunisian equities will post significant gains in 2015.
Table: Political Overview
Long-Term Political Outlook
Political Transition To Be Successful
We are optimistic regarding Tunisia's ability to evolve into a stable dem ocracy, and th e political transition will be the most successful
among the countries that experienced the Arab Spring. An untested institutional framework, job creation and radical Islamist militancy
will be the major challenges to stability over the coming decade.
table: Main Political Blocs
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Activity
Economy To Benefit From Political Stabilisation
Tunisia's economic expansion will accelerate in 2015 as an improving political situation results in renewed business and consumer
confidence. We forecast real GDP growth of 3.4% in 2015 and 3.8% in 2016, from 2.4% in 2014. The macroeconomic outlook will
continue to improve over the next five years, as the government undertakes economic reform and export growth accelerates.
table: Economic Activity
Fiscal Policy
Fiscal Deficit To Narrow
Tunisia's budget deficit will gradually narrow over the next five years, a result of increased revenues and modest cuts to spending.
International support will help avoid a fiscal crisis, but onerous debt repayment will hinder efforts at developing the country.
table: Fiscal Policy
Monetary Policy
Price Pressures To Pick Up In 2015
Price pressures in Tunisia will pick up gradually in 2015 on the back of elevated food prices, further cuts to energy subsidies and an
increase in consumer spending. The central bank will increase the policy rate as a result, which we forecast coming in at 5.00% by the
end of 2015 and 5.25% by the end of 2016 from 4.75% at present.
Economic Activity II
Industrial Production Accelerating From H215
Industrial production in Tunisia will increase from H215 onwards on the back of an improvement in the macroeconomic outlook. We
forecast the industrial production index to expand by 3.5% at the end of both 2015 and 2016, from our estimate of a 0.1% contraction at
the end of 2014.
Tunisia Q2 2015
Chapter 3: 10-Year Forecast
Human Capital To Support Long-Term Growth
The Tunisian economy will bounce back over the coming decade, and will be an outperformer in North Africa. Tunisia's relatively
favourable business environment, along with high human capital development, will attract significant levels of foreign investment, which
will help drive private consumption growth.
table: Long-Term Macroeconomic Forecasts
table: MENA - Selected Business Environment Factors
Chapter 4: Operational Risk
Operational Risk Index
Chapter 5: BMI Global Assumptions
Global Outlook
Weaker EMs To Weigh On Growth
Table: Global Assumptions
Table: Developed States, Real GDP GrowtH, %
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
Table: Emerging Markets, Real GDP Growth, %

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