Tunisia: Looking forward
In spite of the economic turbulence brought about by Tunisia’s dramatic political transition earlier this year, there is growing room for cautious optimism that 2012 will bring a period of recovery for its somewhat shaken economy.
The first month of the revolution is said to have cost the Tunisian economy more than $2bn, and in the following months, uncertainty dominated the country’s business environment. Foreign capital inflows dropped and visitor numbers fell precipitously. However, with an improved political outlook thanks to successful elections in October, interest in the country is growing again.
Indeed, there are signs of renewed interest from investors, particularly from the North African republic’s larger bilateral partners. At a recent Tunisia Partnerships Forum, for example, hosted by the US State Department in mid-November, Noureddine Zekri, the director-general of the Foreign Investment Promotion Agency (FIPA), noted that while the corruption and lack of transparency under the former regime had limited investment from the UK, US, France and Scandinavia, Tunisia was now working hard to eradicate these problems and to create a healthier business environment for foreign investors.
This followed on from a visit by assistant United States trade representative for Europe and the Middle East Daniel Mullaney and assistant United States trade representative for services and investment Christine Bliss to Tunisia in October, to re-launch discussions under the 2002 bilateral Trade and Investment Framework Agreement (TIFA).
Negotiations under the TIFA have focused on strengthening bilateral capital flows and trade volumes in tourism, retail franchising, ICT and alternative energy.
Also pending authorisation is the Tunisia-American Enterprise Fund, which will provide seed money for private sector growth. The fund will support investors and help Tunisians launch SMEs, which should provide longer-term growth prospects.
More crucially, Tunisia’s single-biggest trade and investment partner, the European Union, is also looking to provide increased funds to help underwrite the country’s medium and long-term growth prospects. As part of the Deauville partnership with the country, the European Investment Bank (EIB) committed a €140m loan promoting economic development in the country. The funds will go towards financing a large-scale industrial project by the Tunisian Chemicals Group in the phosphates industry, which makes up more than 2.6% of the country’s GDP, providing valuable additional export revenues.
As a result, thanks in large part to the improvement of inbound capital and additional financing, the World Bank expects the pace of economic activity in Tunisia to quicken, rising to 5% in 2013. The country’s 2012 economic draft budget predicts investment will increase by 18.4%, with the creation of 75,000 new jobs. The budget also identifies industry and construction as growing sectors. The Central Bank of Tunisia predicts a 4.5% growth rate for 2012, up from 1% in 2011.
It is possible, however, that another facet of Europe will do more to affect Tunisia’s economy as some concern had been expressed over potential fall-out from the economic crisis there. Exports to Europe provide Tunisia with 20% of its workforce – almost 320,000 jobs, and EU trading partners make up 80% of Tunisian foreign exchange, so the implications for the Tunisian economy are clear.
Indeed, lower growth prospects in the country’s main trading partner has already resulted in less demand for Tunisian products, according to local media. Growth rates for Tunisian exports to EU countries fell from 20.9% in the first half of 2011 to 15% in October 2011.
The past year has not been an easy one for Tunisia. However, with the elections having passed smoothly, and steadily increasing interest from investors, the focus can now be shifted to the implementation of a new and promising economic programme for 2012.