Tunisia Country Risk Report Q2 2016
The Tunisian coalition government is unlikely to unravel as a resultof the breakdown of Nidaa Tounes – the main political party – but willcontinue to face daunting socio-economic and political challengesover 2016. Popular pressure and opposition from vested interestswill continue to slow the pace of reform, particularly in the run-up tolocal elections scheduled for the end of the year.
All three growth drivers of the Tunisian economy – consumption,investment and exports – will remain mired with problems, includingthe lingering effects of last year's terrorist attacks on the tourismsector, the unresolved weaknesses of the banking system and lowpublic investment. We project only a tepid recovery to 2.4% realgrowth this year, from estimated growth of 0.7% for 2015.
Budgetary inflexibility, weak economic growth and growing socialunrest will limit the ability of the government of Prime Minister HabibEssid to narrow the fiscal deficit.
The fragile state of Tunisia's banking sector will remain a dragon the economy over the coming years despite the passage of arecapitalisation plan in August 2015. The issue will continue to bepolitically controversial, and the need for any further bailouts wouldundermine popular support for the government.
While job creation will gradually pick up over the coming years,progress in reducing Tunisia's large unemployment rate will remainslow. The government will struggle to deal with increases in theworking age population as well as growing female participation inthe workforce.
- Executive Summary
- Core Views
- Chapter 1: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Index
- Economic Growth Outlook
- Continued Weakness In All Growth Engines
- All three growth drivers of the Tunisian economy – consumption, investment and exports – will remain mired with problems, including
- the lingering effects of last year's terrorist attacks on the tourism sector, the unresolved weaknesses of the banking system and low
- public investment. We project only a tepid recovery this year, forecasting real growth of 2.4%, from an estimated 0.7% in 2015.
- GDP By Expenditure Outlook
- TABLE: COMPONENTS OF GDP (% OF TOTAL)
- TABLE: GOVERNMENT CONSUMPTION FORECASTS
- TABLE: PRIVATE CONSUMPTION FORECASTS
- TABLE: FIXED INVESTMENT FORECASTS
- TABLE: NET EXPORTS FORECASTS
- Fiscal Policy And Public Debt Outlook
- Fiscal Reforms Constrained By Political Realities
- Budgetary inflexibility, weak economic growth and growing social unrest will limit the ability of the government of Prime Minister Habib
- Essid to narrow the fiscal deficit.
- Structural Fiscal Position
- TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES (2014)
- Monetary Policy
- Dovish Shift For 2016
- Tunisia's interest rate trajectory will be dovish over 2016. We forecast an interest rate cut of at least 25 basis points over 2016, given
- weakening inflationary pressure and the continued weakness of economic conditions and credit growth.
- Monetary Policy Framework
- Chapter 2: 10-Year Forecast
- The Tunisian Economy To 2025
- 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 to drive private consumption growth.
- TABLE: LONG-TERM MACROECONOMIC FORECASTS
- TABLE: MENA – SELECT BUSINESS ENVIRONMENT FACTORS
- Chapter 3: Political Outlook
- SWOT Analysis
- BMI Political Risk Index
- Domestic Politics
- Turbulent 2016 For Essid Government
- The Tunisian coalition government is unlikely to unravel as a result of the breakdown of Nidaa Tounes – the main political party – but will
- continue to confront daunting socio-economic and political challenges over 2016. Popular pressure and opposition from vested interests
- will continue to slow the pace of reform, particularly in the run-up to local elections scheduled for the end of the year.
- TABLE: POLITICAL OVERVIEW
- Long-Term Political Outlook
- Political Transition To Be Successful
- We are optimistic regarding Tunisia's ability to evolve into a stable democracy, and the 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.
- Chapter 4: Operational Risk
- SWOT Analysis
- Operational Risk Index
- Chapter 5: BMI Global Macro Outlook
- Global Macro Outlook
- Downside Risks Gather Momentum
- TABLE: GLOBAL ASSUMPTIONS
- TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
- TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
- TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
- TABLE: MACROECONOMIC DATA & FORECASTS