In its Tunisia rating action commentary, Fitch Ratings forecast the central government deficit to remain high at 8.5% of GDP in 2022, compared with 7.8% in 2021 and the ‘B’ category median of 4.6%.
“We project revenues will recover in 2022 as the economy expands and tax forbearance measures lapse, but this will be largely offset by rising fuel, cooking gas and cereal price subsidies and a growing interest burden,” said Fitch analysts.
It added that wages and interest will absorb close to 70% of revenues and continue to significantly constraining fiscal flexibility despite a hiring freeze.
Fitch projects the deficit to narrow to 6.9% of GDP in 2023, largely on the back of lower spending on energy and food subsidies as international prices moderate. “We forecast debt/GDP to reach 84.0% in 2022 and 84.7% in 2023,” Fitch Ratings pointed out.
