HomeFeatured NewsTunisia on its way back to economic growth (OBG)

Tunisia on its way back to economic growth (OBG)

One year after the Jasmine Revolution, Tunisia’s economy is showing signs of recovery following last year’s political upheaval, noted Oxford Business Group, adding “with support from international partners returning foreign investment and a government commitment to fostering a business-friendly environment, prospects for economic revival look promising. According to the London-based Group, the main challenge for the new government will be economic, rather than political. However, the coalition has confirmed its intention to foster an open business climate in an effort to stimulate economic growth. The government has indicated it plans to improve national infrastructure to attract foreign investment and work towards a regional common market.

Former Interim Prime Minister Beji Caid Essebsi offered some remarks at a December economic conference, warning that short-term economic growth will be crucial to continuing political stability, OBG said.

The political upheaval of 2011 stalled many sectors and precipitated a sharp decline in foreign tourist numbers, from 7 million visitors in 2010 to an estimated 4.5 million last year. Tourism is one of Tunisia’s biggest sources of income and sector revenue is expected to have plunged by roughly 50% in 2011 to EUR 1.2bn.

As a result, Tunisia’s net foreign currency reserves decreased by 20% or TD 2.4bn (EUR 1.23 bn) from January to November 2011. While the economy grew by 1.5% in the third quarter of 2011, full-year growth rang in at 0.2%.

External effects, such as declining demand from the EU, Tunisia’s primary trade partner and the conflict in Libya, its main trade partner in the region, further intensified the negative economic impact.

Yet, OBG noted, the country’s outlook is improving for 2012 as Tunisia receives support from many of its trade and development partners.

EU governments announced December 14 they would start trade talks with Tunisia’s new government. The increased co-operation is intended to support a democratic transition by lowering barriers to trade and spurring economic growth.

Tunisia is also strengthening relationships outside its main trade partners, OBG indicated. During a recent visit to Turkey by Foreign Minister Rafik Abdessalem, both countries highlighted their willingness to increase economic engagement, it added.

Also in January, Tunisia and the Netherlands announced the launch of a program to increase bilateral investment and partnerships. The program will put in place EUR 250,000 fund, which may be increased to EUR 1.5m, to support the creation of joint ventures between companies in both countries.

OBG also said the Government is planning to increase spending in 2012 in an effort to reinvigorate the economy.

Budget officials estimate the 2012 budget deficit will rise to 6% of the GDP, up from roughly 4.5% in 2011. The 2012 budget was set at TD 22.94bn (EUR 11.8bn), a 7.5% increase on 2011.

While public spending aimed at raising wages and subsidies should be beneficial in the short term, according to OBG, these must be matched by rising productivity levels to ensure growth continues. With signs of recovery from local industry and support from international partners, Tunisia should be on its way back to economic growth, OBG said in conclusion.

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