Fitch Ratings, on Sunday, said it has revised the Outlook on Tunisia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to negative from stable and affirmed the IDR at ‘B+’.
Fitch ratings said “Tunisia’s rating is weighed down by high and growing public and external debt, reflecting wide twin deficits, subdued economic growth and sluggish reform momentum against a background of social and political tensions.”
The revision of the Outlook to Negative reflects increased pressures on external finances and the high uncertainty surrounding the government’s capacity to advance the required policies to reduce macroeconomic imbalances,” the rating agency specified.
“Slow progress on largely unpopular fiscal reforms and continued upward pressures on wages will lead to a persistently wide saving-investment gap.
Thin external and fiscal buffers exacerbate the economy’s susceptibility to exogenous shocks.
The rebound in oil prices and tightening US dollar financing conditions on international markets raise downside risks for Tunisia’s external and public finances,” it also pointed out.
Moreover, Fitch expects that inflation will remain well above its long-term average of 4% for the foreseeable future. GDP growth is gradually picking up momentum and will average 2.7% in 2018-2019, up from 1.5% in 2016-2017.
Tourism is rebounding from the slump that followed the 2015 terrorist attacks, aided by an improved security environment. Agricultural output is expected to achieve strong growth and the revival of external demand is supporting manufacturing activity.
Over the medium term, the tightening of the policy mix, pressures on purchasing power and rising costs of inputs will increasingly constrain domestic demand.”