In its commentary on Tunisia’s latest rating action, Fitch Ratings forecast a slowdown in GDP growth to 1.4% in 2023, from 2.4% in 2022.
This is the result of contained but still high inflation (11% average in Fitch’s forecasts), a tighter policy mix in response to the macro and fiscal imbalances, weak growth in Europe (Tunisia’s main trading partner), a high level of uncertainty regarding the direction of reforms and the economy, and unfavorable weather impacting the agriculture sector, it said.
“We expect growth will then improve moderately to 2.3% in 2024, mainly driven by a catch-up effect from 2023, and remain around that level in the medium term,” the ratings agency further pointed out.
Fitch experts also forecast a narrowing of the budget deficit to 5.8% of GDP in 2023 and 4.5% in 2024, from 6.9% in 2022. This is mainly the result of steady revenue performance, the contained wage bill (reducing as a share of GDP), and the lower cost of food and energy subsidies supported by lower international prices.
“However, we believe that stalled progress on reforms is preventing the reduction of budget vulnerabilities to shocks,” Fitch stressed.
