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Tunisia Country Risk Report Q1 2017

  • November 2016
  • -
  • Business Monitor International
  • -
  • 31 pages

Core Views

Tunisia's new unity government led by Youssef Chahed since August 2016 benefits from a large parliamentary majority. Nonetheless, it still confronts daunting socio-economic and political challenges. Popular pressures and opposition from vested interests will continue to slow the pace of reform and fiscal consolidation, particularly in the run-up to local elections scheduled for the first half of 2017. All three growth drivers of the Tunisian economy – consumption, investment and exports – will remain mired with problems, including the lingering effects of 2015's terrorist attacks on the tourism sector, the unresolved weaknesses of the banking system, and low public investment. We project only modest growth acceleration in 2017, and we forecast real GDP growth of 2.6%, up from an estimated 1.5% in 2016.

Nonetheless, structural reforms, including the adoption of a new investment code and updates in the banking regulation framework, will have a positive impact on growth over the medium term. Budgetary inflexibility, weak economic growth, and elevated social unrest will limit the ability of the government to narrow the fiscal deficit, despite International Monetary Fund pressures to cut spending.

Table Of Contents

Tunisia Country Risk Report Q1 2017
Executive Summary 5
Core Views 5
Chapter 1: Economic Outlook7
SWOT Analysis 7
BMI Economic Risk Index 7
Economic Growth Outlook 8
Gradual Recovery Amid Structural Reforms, Though Challenges Remain 8
Tunisia's GDP growth will remain on a modest upward path in 2017, as the benefits of structural reforms, including the new investment
code and the banking sector reform, start to materialise
GDP By Expenditure Outlook 9
TABLE: GDP GROWTH FORECASTS 10
TABLE: GOVERNMENT CONSUMPTION FORECASTS10
TABLE: PRIVATE CONSUMPTION FORECASTS 10
TABLE: FIXED INVESTMENT FORECASTS 11
TABLE: NET EXPORTS FORECASTS 11
Fiscal Policy And Public Debt Outlook11
Fiscal Tightrope Between IMF Pressures And Social Instability 11
The Tunisian government will undertake cautious fiscal consolidation, including several tax hikes in 2017 Social instability will severely
hinder the government's capacity to cut spending on public sector salaries and subsidies, which are structural reforms encouraged by
the IMF This will result in a slow reduction of the budget deficit
Structural Fiscal Position 12
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES13
TABLE: FISCAL AND PUBLIC DEBT FORECASTS 13
Currency Forecast 14
TND: Little Appetite For Dinar14
The Tunisian dinar will continue to depreciate against the dollar and the euro, as the central bank allows greater foreign exchange
flexibility Depreciatory pressures will remain elevated amid a poor current account position and lacklustre foreign investment
TABLE: CURRENCY FORECAST 14
Chapter 2: 10-Year Forecast 17
The Tunisian Economy To 2025 17
Human Capital To Support Long-Term Growth 17
The Tunisian economy will bounce back over the coming decade Tunisia's relatively favourable business environment, along with
high human capital development, will result in an uptick of foreign investment once stability is restored, which will help drive private
consumption growth
TABLE: LONG-TERM MACROECONOMIC FORECASTS 17
TABLE: MENA - SELECTED BUSINESS ENVIRONMENT FACTORS 18
Chapter 3: Political Outlook 21
SWOT Analysis 21
BMI Political Risk Index21
Domestic Politics22
No End In Sight To Terrorist Threat 22
Regional instability and high socio-economic grievances domestically will keep the terrorism risk elevated in Tunisia, with the return of
foreign fighters creating new security challenges for the government This will hold back the recovery of tourism receipts and foreign
investment, thus constraining economic activity
TABLE: POLITICAL OVERVIEW 22
Contents
Long-Term Political Outlook 24
Political Transition To Be Successful 24
We are optimistic regarding Tunisia's ability to evolve into a stable dem ocracy, 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: BMI Global Macro Outlook27
Global Macro Outlook 27
Austerity Has Peaked, But Populism Is Not Yet Policy 27
TABLE: GLOBAL ASSUMPTIONS27
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % 28
TABLE: EMERGING MARKETS, REAL GDP GROWTH, % 29
TABLE: MACROECONOMIC DATA and FORECASTS 31

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