Global Arab Network | After Ben Ali – Tunisia looks toward 5% economic growth

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After Ben Ali – Tunisia looks toward 5% economic growth

Tuesday, 15 February 2011 12:00

The new year brought radical change to Tunisia, as the country’s long-time president, Zine El Abidine Ben Ali, was forced to step down in mid-January following a wave of increasingly violent street protests. While this transition has cast an air of uncertainty around Tunisia’s future, the country’s economic performance over the past year was nonetheless impressive.

According to the Tunisian National Institute of Statistics, GDP grew by 3.8% year-on-year (y-o-y) in the third quarter of 2010, following a rise of 3.1% over the course of 2009. The IMF, meanwhile, reported that Tunisia’s growth could increase gradually and reach an average of about 5% over 2010-14.

Real GDP growth has accelerated since mid-2009, reaching 4.5% y-o-y in the first quarter of 2010, driven by 6.6% growth in the non-manufacturing sector, 5.7% in manufacturing, 5.2% in services and 4% in non-merchant services, supported by public administration. However, this was offset by a slowdown in agriculture and fishing, with production declining by 8.6%, as compared to an increase of 6% in 2009, mainly a result of insufficient rainfall.

With a view to improving the performance of the agricultural sector, one of the country’s main aims has been to increase its share of high-quality exports to the global market. To cope with an expected drop in olive oil production, from 160,000 tonnes in 2009/10 to a projected 110,000 tonnes in 2010/11, the government announced the projected launch of a Tunisian quality label for olive oil and unveiled plans to raise the production of packaged and processed olive oil to 10% of total production, Global Arab Network reports according to OBG.

As part of its efforts to tap into the lucrative international market for organic food products, over the past decade Tunisia has been steadily increasing the amount of cultivated land farmed using approved natural methods. As a result, it has become a major player in the organic farming industry, ranked second in Africa and 24th globally in terms of organic production, with the sector aiming to move further up the rankings. Under a programme running from 2009-14, Tunisia plans to increase the total land set aside for organic produce to 500,000 ha by the end of 2014.

Tunisia’s budget deficit is expected to remain at 3% of GDP, the same level as in 2009. Public debt, meanwhile, has continued falling, from 43% of GDP in 2009 to 39% in 2010. In parallel, imports increased by 20% in 2010, while exports grew by 17%. At the end of November 2010 the account deficit stood at 4.6% of GDP, against 2.8% in 2009. However, official estimates originally projected it to fall again, to 3.7% in 2011.

In 2010 the exchange rate of the Tunisian dinar to the euro was stable, a departure from 2009, when its depreciation made it more attractive for EU investors. The EU remains Tunisia’s main trading partner, accounting for 72.5% of the country’s imports and 75% of its exports in 2009.

According to IMF figures, foreign direct investment (FDI) was up by 5% y-o-y in the first four months of the year. The World Economic Forum’s “Arab World Competitiveness Review 2010” said that Tunisia became an “outsourcing hub” in the MENA region, succeeding in attracting FDI both in traditional sectors such as textiles production, car assembly and food processing, as well as in high-value sector such as IT, aeronautics, and customer service. This shift has begun to bear fruit. According to figures from the Ministry of Industry and Technology, around 25% of Tunisia's 2009 exports were high-tech products. The ministry expects this number to increase to 50% by 2014.

The Tunis Stock Exchange (TSE) ended 2010 at 5111 points, an increase of 19.1%, compared to a rise of 48.4% at the end of 2009. The stock market remains relatively small with around 50 listed companies and relatively low liquidity. The TSE’s rise owed much to the performance of Tunis Re (+110.9%), STIP (+107.1%), El Wifack Leasing (+94.6%), Attijari Leasing (+92.2%), Insurance Salim (+70.9%), Siam (+59.6%) and Amen Bank (+51.6%). Meanwhile, ADWYA (-22.6%), Tunisair (-18.9%), SIPHAT (-14.1%), SOPAT (-12.9%) and SOTUVER (-18.6%) closed with poor results.

According to local media reports, the tourism sector, the country’s largest foreign currency earner, saw overnight stays increase from 27.3m in 2009 to 28m in 2010. However, receipts from tourism fell over the first eight months of the year, from €1.3bn in 2009 to €1.1bn in 2010. Quality has been a particular focus of late, with efforts under way to upgrade infrastructure and improve vocational training centres. Cultural, environmental, wellness and sports tourism are also being developed to balance what is currently a largely seasonal industry. The tourism ministry aimed to welcome 10m tourists per year by 2015, against 7m arrivals in 2009. An influx of Algerian and Libyan visitors – which served to substitute a drop in European tourists during the global recession in 2008-09 – has also been crucial to fiscal stability.

The country’s key challenge is to boost job-generating growth and employment levels, according to IMF economists. As a result of the economic slowdown, unemployment remains high, at 13.3% in 2009, particularly among young graduates (21.7% in 2009). Similarly, inflation – which increased from 3.5 % in 2009 to 4.6% at the end of September 2010 – is an issue that causes hardship among the less well off. These two concerns, allied to a perception of wholly unacceptable levels of corruption, were the main causes of the riots that overthrew the president.

Despite a relatively strong performance in 2010 and gradually improving indicators in some of its main markets in Europe, the ongoing political instability and the public dissatisfaction evident on the nation’s streets make it difficult to predict anything about Tunisia’s fate, let alone its economy.

Global Arab Network

This article is published in partnership with Oxford Business Group

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Last Updated on Tuesday, 15 February 2011 12:10

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