Tunisia is working to gradually improve its economic indicators by means of tough yet necessary structural reforms. Although significant strides have been made since 2011, the country continues to face acute macroeconomic imbalances, while coincident reforms have suffered from changing administrations in the years following the revolution, negatively affecting economic growth.

Appointed in August 2016 as the head of a new national unity government, Prime Minister Youssef Chahed in early 2018 announced a series of reforms which sparked protests across the country. In response, the IMF, which continues to work with the government under its four-year, $2.9bn extended fund facility arrangement, stated that the reform agenda of 2018 was ambitious and should contribute to setting economic growth back on track.

GDP Growth & Composition 

With a relatively stable government and improved security conditions since the terrorist attacks of 2015, Tunisia has been showing signs of recovery, although the pace continues to fall short of the expansion needed to reduce macroeconomic imbalances.

In 2016, the latest year for which full-year data was available, Tunisia’s GDP totalled TD90.4bn (€34.7bn). Services, excluding the government and not-for-profit service sectors, dominated other sectors of economic activity with 40.1% of GDP, followed by government services, which accounted for 19.4%, manufacturing industries with 15.1%, other industries at 9.2% and agriculture with 9.1%. Tunisia’s GDP grew by 1% in 2016, below the 2.6% targeted in the 2016 Finance Law, due in part to the persistent perception of security constraints and a fragile social climate. Growth increased from 0.7% in the first quarter of 2017 to 1.2% in the second and third quarters, before dropping to 1.1% in the fourth quarter. In the same year, government services sector grew by 13.5% and commercial services by 7.2%, while the non-manufacturing industry contracted by 7.1%. The government has been intensifying the pace of reforms to create the required environment for higher growth. Preliminary figures for 2017 confirmed a gentle upward trajectory for Tunisia’s GDP, with both the IMF and the central bank, the Banque Centrale de Tunisie (BCT), forecasting 2.3% growth. According to figures from the National Institute of Statistics (Insitut Nationale de la Statistique, INS), the first three quarters of 2017 saw growth of 1.9%, 1.7% and 2.1%, respectively.

In 2018 growth is projected to pick up to 3%, according to the IMF, or 2.8% by government estimates. Both are higher than the trend Tunisia has experienced since the 2011 revolution, which has averaged 2% per annum over the past six years. With growth being constrained by delays in the implementation of structural reforms and still-low private investments, it is the recovery of phosphates and tourism, as well as higher public investment and wage increases that should contribute to increased growth figures in the years to come.

Reforms under Way 

The 2018 Finance Law, adopted by the Parliament in December 2017, has been welcomed by the IMF delegation, which approved the government’s target of tackling major structural imbalances, including bringing the budget deficit below 5% of GDP, down from an estimated 6% in 2017 and 6.1% in 2016. Further reforms are under way, as exemplified by the incremental liberalisation of the Tunisian dinar, which should help improve export competitiveness and reduce fiscal imbalances in the long run (see analysis).

However, more comprehensive and effective efforts will be needed if the government is to address structural issues. The public sector wage bill, for instance, continues to weigh heavily on public finances, accounting for 2.5 times public investment and 14% of GDP in the 2018 Finance Law. As Gérald Audaz, head of the economic development department of the EU delegation, told OBG, “The 2018 Finance Law did not integrate earlier commitments related to the wage bill issue, which is a source of concern among partners such as the EU”. As part of its 2016-20 Development Plan, the government committed to reducing the wage bill to 12.5% of GDP. While efforts to boost private investment are contained in the long-awaited 2017 investment law, which simplifies the investment framework, its complete implementation could take up to three years.

Tourism Recovery 

Current economic growth is supported by key sectors such as tourism, which also contributes significantly to employment. The World Travel and Tourism Council estimated the industry’s total contribution at 13.7% of GDP in 2016, providing for 430,500 jobs, including those indirectly supported by the industry, or 12.6% of total employment. Despite its strong performance, the industry suffered from the aftermath of the 2011 revolution, and later, from the two terrorist attacks in 2015, with receipts fluctuating between TD3.5bn (€1.3bn) in 2010 and an estimated TD2.3bn (€883m) in 2016. “It is all interconnected: Europe’s economic performance affects Tunisia’s tourism, which depends on regional stability and perceptions of insecurity,” Fausi Najjar, regional director of Germany Trade and Invest, told OBG. “Tourism needs to be more dynamic, especially in certain regions of the country that are under-exploited. It should not be limited to the seaside; the many-fold landscapes and rich cultural heritage should play a bigger role.”

Measures to boost the potential of the tourism industry in key regions have been integrated into the 2018 Finance Law, including tax exemptions for tourist agencies that operate in the Tunisian desert. Improved security conditions in Tunisia and a better economic outlook in Europe have contributed to the industry’s recovery in 2017, as the number of tourists increased by 23.2% over 2016, according to early government estimates (see Tourism chapter).


In the aftermath of the 2011 uprising, unemployment rose from 13% in 2010 to 18.9% in 2011. In subsequent years it scaled back, reaching 15% by 2017, according to IMF figures. Although Tunisia has experienced a relatively smooth political transition since 2011, the lack of jobs, a high rate of inflation – which experienced a 6.4% yearon-year increase in December 2017 – and austerity measures such as those in the 2018 Finance Law continue to fuel social tensions, as shown by the protests across the country in early 2018.

Joblessness is especially high among the female population, at 23.1% in 2016, despite a female labour force participation rate of 24.4%, according to the latest available figures from the World Bank. The gender gap is also significant within the graduate population, as the unemployment rate stood at 19.9% for male graduates, as compared to 40.6% for their female counterparts, averaged across the first three quarters of 2017.

Inflation & Monetary Policy 

While inflation came down to 3.7% in 2016, after peaking at 5.8% in 2013, the figure grew again in 2017, hitting a new record at 6.4% in December. The BCT announced an average figure of 5.3% for 2017 overall. “Rising imports of consumer goods, along with a depreciating Tunisian dinar and, to a lesser extent, the rise in value-added tax and Customs in 2018, have contributed to higher inflation,” Najjar told OBG.

In an effort to curb price rises, the BCT adapted its monetary policy in April 2017, injecting $100m into the Tunisian financial market, first adjusting the country’s policy rate from 4.25% to 4.75% and then to 5% from May and 5.75% from 2018 onwards as a means to limit individual consumption through higher bank lending rates, increasing banking sector liquidity. As inflationary pressures persisted, the BCT raised the minimum rate of savings by the end of 2017, from 4% to 5%, to incentivise saving while promoting the financing of domestic investment through equity. The central bank committed to adjusting its monetary policy according to the evolution of inflation in the future. For its part, the IMF called for further monetary policy interventions to tackle inflation and support the national currency.

Foreign Exchange & Reserves 

Although the Tunisian dinar is pegged to a weighted basket of currencies dominated by the euro, it has been allowed to lose value for the past 10 years, experiencing downward pressures that have been exacerbated since 2016. After losing 10% of its value against the euro in 2016, the currency dropped significantly throughout 2017, from €1:TD2.47 in early January 2017 to €1:TD2.94 by the end of December, a 20% decrease for the year overall. The changes reflect the IMF’s earlier call for greater flexibility in the exchange rate regime aimed at protecting international reserves while working to support Tunisia’s export sector (see analysis).

Despite the national currency’s devaluation, however, foreign currency reserves have fallen since 2010, from 147 days’ worth of imports to about 85 days, standing at TD11.8bn (€4.53bn) in early 2018.

Trade Deficit

The fall in foreign currency reserves is partly due to a high trade deficit, which originates from import growth that outpaces that of exports, rather than a decline in exports. Although Tunisia has run a trade deficit since at least the early 1990s, the figure has increased significantly in recent years, by 47% between 2011 and 2016, to TD12.6bn (€4.8bn). In 2017 exports grew 18.1% as compared to 2016, while imports rose by 19.8%, bringing the rate of import coverage by exports down from 69.8% in 2016 to 68.8% in 2017.

As a result, the current account deficit further deteriorated in 2017, according to the BCT, standing at 9.7% of GDP for the first 11 months of 2017, compared to 8.1% for the same period in 2016, despite the mobilisation of significant external resources, such as the launch of the second Macro-Financial programme loan to Tunisia for TD517m (€199m), granted by the EU in October 2017.

“Demand for competitive consumer goods from other developing countries – such as China – has increased sharply in 2016-17, boosted by wage hikes in the public sector, which is to be put into perspective with a dull economic outlook, incentivising consumption,” Habib Hammami, head of the forecast department at the Export Development Centre (Centre de Promotion des Exportations, CEPEX), told OBG. In 2017 China remained the major contributor to Tunisia’s overall trade deficit, with a coincident trade deficit of TD4.4bn (€1.7bn), a 10% increase over 2016. Second to China in 2017, Italy contributed to Tunisia’s trade deficit by TD2.1bn (€806m), Turkey TD1.9bn (€729m) and Russia TD1.1bn (€422m). Although not sufficient to compensate for the rise in imports, Tunisia’s trade balance recorded a surplus with France at TD3bn (€1.2bn), Libya at TD900m (€346m) and the UK at TD200m (€77m).

Export Support 

In an effort to reduce the country’s deficit, the government is implementing measures including the Support Fund for Competitiveness and Export Development (known as TASDIR+), managed by CEPEX, which accompanies Tunisian firms in the process of exporting their goods or services abroad via technical and financial support. After integrating 103 enterprises into the fund’s programme in 2016, for a total investment of TD20m (€7.7m), a second round was launched in 2017. At the other end of the spectrum, the BCT intends to reduce imports to tackle the trade deficit; the body issued a list of non-essential consumer goods subject to restrictions since October 2017 for which importers must deposit a guarantee equivalent to the total value of the imported goods into a local bank account prior to import.

The 2018 Finance Law also includes tax increases on specific, selected products, which largely concern imported consumer goods such as cosmetics, tourist vehicles, accommodations and alcoholic beverages.

Trade per Sector 

Manufacturing industries represented the largest export sector in 2017, with sales of TD19.1bn (€7.3bn), or 55.5% of total exports, including textiles at TD7.6bn (€2.9bn). Agriculture exports experienced a 7.1% increase in volume, worth TD3.7bn (€1.4bn), while energy exports were valued at TD2bn (€768m). Imports were also dominated by manufactured goods, at TD31.2bn (€12bn) or 62.4% of imports overall, followed by both textiles and energy at around TD6.1bn (€2.3bn) each, and then by agriculture at TD5.8bn (€2.2bn).

Foreign Investment 

The value of total foreign direct investment (FDI) inflows for 2017 rose by 11.9% over 2016, according to the Foreign Investment Protection Agency (FIPA), hitting TD2.13bn (€818m). This growth marks a significant reversal from 2016, which saw FDI inflows fall by 3.3% over 2015 to end the year at TD1.9bn (€730m). “The Tunisia 2020 investment conference of November 2016 increased Tunisia’s visibility in the eyes of international investors, and its impact on FDI was felt throughout 2017,” Zied Lahbib, head of the strategy and studies department at FIPA, told OBG.

Sponsored by France and Qatar, the investment conference attracted representatives from 40 different countries, mobilising around TD34bn (€13.1bn) in investments, including TD15bn (€5.8bn) in signed agreements and TD19bn (€7.3bn) in pledged investments. Lahbib also told OBG that in the aftermath of the conference, a greater number of delegations of prospective investors visited the country. France ranked as the largest contributor to Tunisia’s FDI inflows (excluding energy) in 2017, with TD585m (€225m), or 44.4% of the total, followed by Germany with TD137m (€52.6m), or 10.4%, and Italy came in third place with TD97.6m (€37.5m), or 7.4%.

France has consistently accounted for the plurality of FDI inflows in recent years, having contributed 33% in 2016. That year Germany was still the second-largest contributor at 14.7%, and the UK had 8.3%. “Up to 80% of investments from France are extensions – companies that continue to make a profit are expanding their operations. However, no new French investors entered the Tunisian market in 2017,” Habib Gaida, director-general of the French-Tunisian Chamber of Commerce, told OBG.

“An efficient way to attract major investors into Tunisia would be to unblock large public-private partnerships (PPPs), such as the ones announced and regulated by the 2015 PPP Law. However, the implementation of those PPPs is experiencing delays, in part because the unions have been stopping them, as they perceive such projects as a form of privatisation,“ he added. The value of FDI increased in 2017, with industry remaining the largest destination for foreign investment, with TD974m (€374m), or 46% of total investment, followed by the energy sector with TD810m (€311m), or 38% of total FDI. The third-largest sector was services, receiving TD318m (€122m) or 15%, while agriculture attracted just 1% of FDI, at TD25.6m (€9.8m).

Innovation Promotion

Tunisia’s start-up scene is dynamic, supported by recent rapid growth in the number of incubators. Start-ups face a number of challenges, including limited infrastructure outside of major cities, a difficult business environment and limited access to finance (see analysis). “Financing a start-up remains extremely difficult in Tunisia, as there is a particular shortage of actors willing to provide financing at levels below TD100,000 (€38,400), while microfinance institutions are limited by law in their ability to finance such activities,” Mathilde Estienne, financial sector project manager, at the French Development Agency, told OBG.

The Start-up Act, which was approved by the government in late 2017 and was passed by Parliament on April 2, 2018, is working to set up a legislative framework to help boost the development of this segment through simplified administrative procedures and easier access to finance.

Notwithstanding current obstacles, the Tunisian start-up ecosystem continues to grow – with new companies such as Wattnow, created in January 2017, empowering its clients to monitor and adjust their energy consumption – along with a developing support system for innovation, as exemplified by the inauguration in early 2018 of “Le15” a new building located in the centre of Tunis and dedicated to young entrepreneurs. Financed by portfolio management company Meninx Holding, Le15 is a local start-up hub working in collaboration with Flat6Labs, an incubator and investment fund programme focused on the MENA region.


Multiple delays in implementing longawaited structural reform were experienced in 2017, postponing the economy’s recovery. In response, the start of 2018 saw the government draft and enact far-reaching reforms in an attempt to quicken the restoration of macroeconomic equilibrium in the medium term. It is generally hoped that the negative impact of those reforms will be mitigated – in the short to mid-term – by the recovery of key economic sectors, including tourism and phosphates. In addition, these concrete moves by the government to enact the pending changes should help bolster continued efforts at transparency and reformation.

This, coupled with the improvement of both external and domestic environments and the projected pick-up of investment supported by capital inflows, should allow and encourage the Tunisian GDP to increase beyond levels seen in recent years.