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Tunisia Business Forecast Report Q1 2015

  • November 2014
  • -
  • Business Monitor International
  • -
  • 29 pages

Core Views

T he National Constituent Assembly (NCA) – the country's legislature – adopted a new constitution in January 2014, the first since the ousting of former President Zine el-Abidine Ben Ali in January 2011. We are optimistic towards the country's political trajectory, even as threats to the political transition, particularly those posed from the presence of jihadist groups in the country, remain significant. W e anticipate slow growth in Tunisia in 2014. Ongoing political instability is likely to limit direct investment and tourist arrivals. Growth will accelerate from 2015 onward, and an improvement in political stability will result in a return of FDI from H215.

Major Forecast Changes

W e have revised downward our 2014 estimate for Tunisian real GDP growth to 2.3%, from 2.8% previously, on the back of slow H114 growth and significant security risks. We reaffirm our optimistic view on Tunisia's political transition, and expect a combination of renewed business and consumer confidence and low base effects will lead to growth of 3.9% in 2015.

Table Of Contents

Tunisia Business Forecast Report Q1 2015
Executive Summary 5
Core Views 5
Major Forecast Changes 5
Key Risks To Outlook 5
Chapter 1: Political Outlook 7
SWOT Analysis 7
BMI Political Risk Index 7
Domestic Politics 8
Nidaa Tounes-Ennahda Coalition To Emerge Following Vote
A coalition government composed of secular party Nidaa Tounes and Islamist party Ennahda will emerge following Tunisia's October 26
general election won by Nidaa Tounes. Although a new government will not be sworn in before the beginning of 2015, we reaffirm our
optimistic view on the country's transition.
Table: Political Overview 8
Long-Term Political Outlook 9
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 2: Economic Outlook 13
SWOT Analysis 13
BMI Economic Risk Index 13
Economic Activity 14
Economy Rebounding From 2015
We have revised downward our 2014 and 2015 real GDP growth forecasts for Tunisia due to increasing security risks, and project real
GDP growth of 2.3% this year and 3.9% the next. We reaffirm our optimistic view on the Tunisian economy over the next five years, and
project real GDP growth to average 4.0% over this period.
Table: Economic Activity 14
Fiscal Policy 16
Low Risk Of Payment Crisis Despite Elevated Deficits
Tunisia's budget deficit will narrow only gradually over the next five years, as current spending remains elevated and popular opposition
slows the pace of reform. The government will be able to avoid a payment crisis, but low capital spending will exacerbate economic
inequalities between the country's interior and coastal regions.
Table: Fiscal Policy 16
Monetary Policy 18
Policy Rate Hikes In 2015 And 2016
Price pressures in Tunisia will accelerate slightly in 2015 on the back of elevated food and transportation prices. 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
Table: Monetary Policy 18
Chapter 3: 10-Year Forecast 21
The Tunisian Economy To 2023 21
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 21
Table: MENA - Selected Business Environment Factors 22
Chapter 4:Operational Risk 25
BMI Operational Risk Index 25
Chapter 5:BMI Global Assumptions 27
Global Outlook 27
Reality Check: Uncertainty Reigns 27
Table: Global Assumptions 27
Table: Developed States, Real GDP GrowtH, % 28
Table: Emerging Markets, Real GDP Growth, % 29

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