Tunisia consistently ran a fairly small current account deficit for most of the late 2000s, with the figure standing in the low single digits as a percentage of GDP. However, as with many economic indicators, the deficit worsened significantly in the years immediately following the country’s revolution, jumping to 7.4% in 2011 and peaking at 9.1% in 2014.
The rise in the deficit has had a number of implications for the broader economy, including a tightening in banking sector liquidity, which has restricted lending growth, and by extension wider economic expansion. The shortfall has also put downward pressure on the dinar, which has consistently declined in value in recent years, and on foreign exchange reserves, which at around 3.5 months of imports are generally viewed as adequate under current circumstances, but which do not leave a great deal of room to manoeuvre should the economy face further external shocks.
Export Impact
The growth of the deficit in recent years was driven in large part by a slowdown in export growth, leading to a deterioration in the country’s trade balance. The value of exports rose at a compound annual growth rate of 11.6% between 2002 and 2010, but this dropped to less than 3% between 2011 and 2015 due to factors such as the eurozone slowdown. Tourism receipts also declined, pushed down first by the international financial crisis, from $3.9bn in 2008 to $3.48bn in 2010, before falling even more sharply to $2.53bn in 2011 against a backdrop of political upheaval in the aftermath of the revolution. While the figure had recovered somewhat to $3.04bn by 2014, it remained well below pre-revolution levels.
Recovery
However, in 2015 the deficit shrank as a share of GDP for the first time since 2009, suggesting that the country may have reached a turning point regarding its external finances. This improvement was achieved despite the tourism sector receiving a further major blow in the first half of the year in the form of two large terrorist attacks targeting foreign visitors, which pushed tourism receipts down from TD3.63bn (€1.6bn) in 2014 to TD2.41bn (€1bn). Nevertheless, the size of the deficit fell over the course of the year to an estimated 8.8% of GDP, according to IMF estimates. This was largely thanks to a significant improvement in the trend of the trade deficit that year, boosted by factors such as the fall in the oil price. In absolute terms, the value of the trade deficit stood at TD7.55bn (€3.24bn) in 2015, up slightly from TD7.37bn (€3.16bn) the previous year, according to figures from Tunisia’s central bank, Banque Centrale de Tunisie.
2016 Movement
The deficit was stable in absolute terms over the first 10 months of 2016, standing at the equivalent of 7.5% of GDP in October, unchanged from the same period in 2015. This represented a deterioration over the previous month, when the figure had stood at 6.45%, compared to 6.9% a year earlier. Factors preventing an outright improvement included worsening olive oil exports, following very strong performance in 2015, and reduced oil production, requiring an increase in the volume of imports. Tourism receipts were down by 7.1% for the period, though this represented a significant slowing on the decline of 31% registered over the same period in 2015.
Based on the figure for the first 10 months of 2016, the central bank forecast the deficit would stand at 8.5% for the year as a whole, while the IMF expected it to come in at 8% of GDP, and then to gradually decline in subsequent years to 4% by 2021. Efforts to boost investment and exports should help to improve the situation, with the recent decline in the value of the Tunisian dinar likely to give exports a further boost and put downward pressure on imports.
The government also appears to be taking additional measures to reduce imports. For example, in December 2016 car distributors complained that the authorities were refusing to authorise requests to import cars, in keeping with previous government hinting that they would seek to limit foreign vehicle purchases.
