The International Monetary Fund (IMF) presented its annual regional economic outlook for North Africa in Tunisia, after presenting its Middle East report in Dubai. The presentation was attended by Central Bank of Tunisia Governor Chedly Ayari, Minister of Finance and Economy Hakim Ben Hammouda and IMF representative in Tunisia Giorgia Albertin.
The IMF report highlighted the challenges to the global economy amid a growing downward trend and the consequent impact on the Tunisian economy.
According to the report, the national economy differs from other countries in the region. Indeed, Tunisia is no longer experiencing major economic turbulence, as it has currently reached an economic stability zone. Tunisia has achieved a growth rate of 2.8% for 2014, similar to Egypt's 2.2% growth rate, and relatively higher than Morocco's 1.1%.
As for the 2015 forecasts, the IMF expects a high growth rate of 3.7% for Tunisia. This rate effectively marks the end of economic turbulence. For Egypt, the IMF predicts a growth rate of 3.5%, and 2% for Morocco. Tunisia’s trade deficit in 2015 will slightly improve and move from -7.7% in 2014 to -6.6% in 2015. Morocco will also witness a slight improvement in 2015 with a trade balance deficit that is expected to move from -6.8% to -5.8%. On the other hand, Egypt will witness a remarkable increase in its balance of trade deficit in 2015, which will reach -4.0% from 0.4% in 2014.
The slow growth observed in Tunisia in 2014 is due to deep sociopolitical tensions. However, the IMF’s report indicated that “a gradual improvement in confidence is expected to support domestic demand as political uncertainty eases.” However, these elements will not be enough to lower the unemployment rate, which remains high given the risks surrounding the outlook of a bearish trend. In this regard, the IMF stated that “setbacks in political transitions, intensified social and security tensions and spillovers from regional conflicts, as well as a lower-than-expected growth in key trading partners, could undermine the recovery.”
Finance and Economy Minister Hammouda said during the presentation that Tunisia should take action to improve the economic situation. Indeed, he said Tunisia's trade deficit was significantly lower than average in North Africa, according to the IMF report. Moreover, Tunisia’s indebtedness rate is low when compared to other countries in the Arab region.
Furthermore, Tunisia's budget deficit hovered around 5% in 2014 and, according to IMF projections, will approach 6% in 2015. Compared to 2013, the budget deficit recorded a slight increase. This deficit may be reduced by implementing subsidy reforms and thus leading to savings of 1 percentage point of the GDP on average in 2014-2015. In terms of external imbalances, a gradual improvement was noted in exports, tourism and foreign direct investments.
According to the IMF, this improvement could be explained in light of the gradual dissipation of political uncertainty. External imbalances are thus improving, but remain significant.
In its report, the IMF stated that a reduction of $10 in oil prices compared to the baseline scenario could reduce budgetary and external deficits. However, in the same vein, Ayari, from the central bank, said that a reduction in the price of fuel is not easy to achieve. In fact, any reduction of this sort would involve a decrease in the state’s revenues and would thus necessitate finding new resources.
Regarding unemployment, the IMF said in its report that the medium-term growth is too low to achieve substantial progress in terms of unemployment and living standards. The baseline growth rate stands at 5%, while unemployment decreases by 1% to 11%.
At the end of 2014, Tunisia was below the 40th percentile in terms of trade and bureaucracy, and below the 60th percentile at the level of education, financial, legal and regulatory corruption. To get out of the 40th percentile, wide-ranging structural reforms are necessary for Tunisia, according to the IMF. In fact, $15 billion worth of additional investment in the infrastructure per year could help Tunisia gain 1.5 point of growth on the scale.
The IMF recommends that Tunisia maintains its macroeconomic stability to progress in the implementation of planned reforms in order to generate a stronger and more inclusive growth, in addition to enacting reforms in the banking sector and at the budgetary and structural levels.
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