Tunisia's 2.1% GDP growth marks economic upturn
May 24, 2017
By relying more on investment than loans, Tunisia can mitigate the damage of a large trade deficit.
Tunisia’s economy grew 2.1% in the first quarter of 2017, with significant gains in agriculture, tourism and market services, the government-run National Institute of Statistics (INS) said.
The upturn marks Tunisia’s largest quarterly growth rate in more than two years but is less than the government’s intended growth rate of 3.7% per year.
The economic data comes amid concern over the country’s soaring trade deficit, which grew 57% in the same quarter, and fluctuations in the currency, which dropped to historic lows in late April before rebounding slightly. Recovery efforts have been dogged by inflation and the security of oil, gas and phosphate output.
An April report by the World Bank noted strategic sectors of Tunisia’s economy were improving but at a much slower pace than anticipated.
“Tunisia has made great strides to advance its political transition but tangible economic dividends are taking longer than expected with growth too low to significantly make a dent in unemployment amid widening fiscal and current account deficits,” the report said.
The growth rate, the report noted, is projected to accelerate to 2.3% overall in 2017, 2.8% in 2018 and 3.2% in 2019.
Tunisian economist Hafedh Ben Abdennebi, who specialises in economic development, attributed the improving growth rate to industries such as mining and tourism, which saw a surprise hike recently and helped bring in foreign revenue. He also noted that “a trimester’s economic growth is not representative enough” on which to base long-term projections.
Tunisia’s inflation rate was 5% in April and is expected to hit 6% by 2020. Central Bank Governor Chedly Ayari called the dangers of excessive inflation “extremely worrying.”
High inflation could be of particular concern to Tunisia’s poor and middle class. Tunisian economist Habib Zitouna said several measures, such as increased salaries and lower taxes, had been made to help address this concern.
Ben Abdennebi, as well, cautioned against being too pessimistic, saying that it is vital to “reassure manufacturers and foreign investors to confirm their investment promises.”
In November 2016, the international investment conference Tunisia 2020 drew billions of dollars in investment pledges for infrastructure and development projects. Whether investors follow through on their pledges, however, remains to be seen and depends largely on whether and to what extent the market recuperates.
Modest gains in the country’s gross domestic product have not allayed concerns of much of the public, which still faces high unemployment and poverty rates, particularly in rural areas.
In late April and early May, about 1,000 protesters demanding better access to employment and a share of the government’s energy revenue demonstrated in Tataouine. The protests, some of which blocked access to production facilities, disrupted oil and gas production for weeks, prompting Tunisian President Beji Caid Essebsi to deploy the army to the region.
Weeks earlier, Prime Minister Youssef Chahed, during a visit to Tataouine, was heckled as he spoke on improving development efforts.
“Our young people have just two choices: Drown in the sea or set themselves on fire!” one woman reportedly shouted during his remarks.
Adding to the debate is Tunisia’s reliance on foreign goods, with many arguing that the country should trim imports and prioritise the production and consumption of Tunisian goods.
Ben Abdennebi, however, said restricting imports is out of the question.
“Government partnerships with other parties must be respected and upheld…,” he said. “The government doesn’t have a choice… but Tunisian consumers do and it’s up to the civic community to encourage citizens to consume Tunisian goods.”
“Tunisians buy more than they produce,” added Zitouna, “and some of the imports are quite essential such as oil, cereal and transport equipment.”
Zitouna said that, by relying more on investment than loans, Tunisia can mitigate the damage of a large trade deficit.
Tunisia’s economic hardships are reflective of the experience of the MENA region.
“With an expected average growth rate of 3% in 2016, the short-term economic outlook for the Middle East and North Africa (MENA) region remains ‘cautiously pessimistic,’” reads a recent report from the World Bank’s MENA Economic Monitor.
“Since 2013, MENA has not been able to escape the spiral of slow growth for a number of reasons: Prolonged cheap oil, with the market settling into a ‘new normal’ of low oil prices for several years; civil wars that have severely damaged the economies of Syria, Libya, Yemen and Iraq; and the impact of forced displacements on the economies of Lebanon, Jordan and elsewhere in the region.”
Source: The Arab Weekly