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Tunisia¡¯s Economic Outlook- April 2017

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. A national unity government - a coalition of the main political parties and civil society groups - was formed in September 2016 to tackle the urgent economic reforms but has undergone its first, albeit minor, cabinet reshuffle in February 2017.

Tunisia¡¯s economy grew at an estimated annual rate of 1.0% in 2016 (2.0% excluding agriculture and fisheries) compared to 1.1% in 2015 (0.1% excluding agriculture). Growth in 2016 was driven mainly by the tradable services sector and the non-tradable activities sector, which grew each by 2.7% as well as the manufacturing industries sector (+0.9%).

Economic growth is projected to accelerate to 2.3% in 2017 through the recovery of the strategic sectors of agriculture, phosphate and manufacturing. In the medium term, economic growth is projected to pick up gradually to 2.8% in 2018 and 3.2% in 2019 against a backdrop of improved business climate through structural reforms and greater security and social stability. The fiscal deficit is expected to remain high at 5.9% of GDP in 2017. Fiscal sustainability will require reining in the public wage bill, expanding the tax base, and creating space for increased investment spending.

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