Economic Situation: Less Room to Maneuver
20 March 2013
Read by 1638 persons
• "The cost of the revolution, measured by the output gap, was higher than I predicted," warns the former governor of the BCT. Indeed, the gap between projected and actual growth rates showed an output gap of 6.5% in 2011 and 7.5% in 2012, a total cost of 14%.
Where are we going? This is the question to which the former governor of the BCT, Mr. Mustapha Kamel Nabli, attempted to provide answers after giving a macroeconomic overview of the two years following the revolution.
Indeed, the Tunisian economy, and more generally the democratic transition process, is at a crossroads, he explained at a conference-debate organized by the Association of Tunisian Economists (ASECTU).
"To get bogged down in a vicious cycle of political instability and insecurity that would cause a drop in exports and investments, or to develop the factors of renewed confidence that would stimulate a virtuous cycle of investments and exports," he summarizes. And he warns: "We have the possibility to bounce back, but I'm not sure we will in a few months." There are many economic decisions to be made. "Doing nothing is often not the right solution," he insists. To this end, he advises using the available tools, including the interest rate and the exchange rate, at the monetary level. Because, according to the economist, since history has shown that crises cannot be predicted, it is better to immunize oneself. From this perspective, he noted several vulnerabilities that, if they persisted, could trigger an external payment crisis, a public finance crisis, or a banking system crisis.
The high cost of the revolution
Figures can be made to say anything. Moreover, lately, interpretations of economic indicators have diverged, even contradicted each other. Mr. Nabli noted discrepancies between his own predictions and the results. "The cost of the revolution, measured by the output gap, was higher than I predicted," he warns. Indeed, the gap between projected and actual growth rates showed an output gap of 6.5% in 2011 and 7.5% in 2012, for a total cost of 14%.
This underperformance is mainly due to the sharp drop in activity in sectors he describes as devastated, namely mining and phosphates, oil, tourism, and related transport. The climate of insecurity and the surge in strikes and sit-ins have hampered the exploitation and export of these sectors. In addition to the drop in exports, the significant decrease in investments, by 12.6%, also weighed heavily on the state's accounts.
Thus, in 2011, consumption was the only driver of economic growth. "The 4.6% increase in consumption limited the damage," estimates the former governor.
In 2012, the timid recovery of the devastated sectors and exports confirmed the role of consumption as the engine of growth. Thus, the two monetary and budgetary engines were used to ensure a demand-driven recovery. But these recovery policies generated perverse effects on inflation and the current account.
On another level, Mr. Nabli recalled that the slight increase in investments was mainly due to public efforts rather than the involvement of the private sector. In this regard, he insists: "The investment code is not a priority. Even with the best code, without a favorable climate, we cannot hope for a revival of private investment." As for FDI, a large part of it is generated by the sale of confiscated companies, such as Tunisiana and the Banque de Tunisie.
Focusing on employment, he notes that the recovery began in the second quarter of 2011. For 2012, the number of jobs created amounted to 85,000, compared to the 100,000 announced and publicized. And nearly half of these jobs, 40,000, were created in small service sectors, particularly maintenance and repair and commerce. This fuels doubts about the quality and stability of these positions. The already oversized public administration, for its part, absorbed 20,000 jobs.
Regarding public finances, he estimates that without adjusting accounts by eliminating exceptional revenues generated by the sale of confiscated assets, the budget deficit would be 8.37% instead of the announced 6.67%.
Finally, one thing is certain: with the revolution, citizens aspired to a better life, even more difficult to achieve today. This fuels their concerns. To this effect, the former governor relativizes: "The room for maneuver is shrinking. Today, we have a chance to get out of this, but I'm not sure we will have that possibility in a few months."
Ridha MAAMRI.
© Copyright La Presse
Africatime.com
Published March 19, 2013.
Posted online March 20, 2013.
Where are we going? This is the question to which the former governor of the BCT, Mr. Mustapha Kamel Nabli, attempted to provide answers after giving a macroeconomic overview of the two years following the revolution.
Indeed, the Tunisian economy, and more generally the democratic transition process, is at a crossroads, he explained at a conference-debate organized by the Association of Tunisian Economists (ASECTU).
"To get bogged down in a vicious cycle of political instability and insecurity that would cause a drop in exports and investments, or to develop the factors of renewed confidence that would stimulate a virtuous cycle of investments and exports," he summarizes. And he warns: "We have the possibility to bounce back, but I'm not sure we will in a few months." There are many economic decisions to be made. "Doing nothing is often not the right solution," he insists. To this end, he advises using the available tools, including the interest rate and the exchange rate, at the monetary level. Because, according to the economist, since history has shown that crises cannot be predicted, it is better to immunize oneself. From this perspective, he noted several vulnerabilities that, if they persisted, could trigger an external payment crisis, a public finance crisis, or a banking system crisis.
The high cost of the revolution
Figures can be made to say anything. Moreover, lately, interpretations of economic indicators have diverged, even contradicted each other. Mr. Nabli noted discrepancies between his own predictions and the results. "The cost of the revolution, measured by the output gap, was higher than I predicted," he warns. Indeed, the gap between projected and actual growth rates showed an output gap of 6.5% in 2011 and 7.5% in 2012, for a total cost of 14%.
This underperformance is mainly due to the sharp drop in activity in sectors he describes as devastated, namely mining and phosphates, oil, tourism, and related transport. The climate of insecurity and the surge in strikes and sit-ins have hampered the exploitation and export of these sectors. In addition to the drop in exports, the significant decrease in investments, by 12.6%, also weighed heavily on the state's accounts.
Thus, in 2011, consumption was the only driver of economic growth. "The 4.6% increase in consumption limited the damage," estimates the former governor.
In 2012, the timid recovery of the devastated sectors and exports confirmed the role of consumption as the engine of growth. Thus, the two monetary and budgetary engines were used to ensure a demand-driven recovery. But these recovery policies generated perverse effects on inflation and the current account.
On another level, Mr. Nabli recalled that the slight increase in investments was mainly due to public efforts rather than the involvement of the private sector. In this regard, he insists: "The investment code is not a priority. Even with the best code, without a favorable climate, we cannot hope for a revival of private investment." As for FDI, a large part of it is generated by the sale of confiscated companies, such as Tunisiana and the Banque de Tunisie.
Focusing on employment, he notes that the recovery began in the second quarter of 2011. For 2012, the number of jobs created amounted to 85,000, compared to the 100,000 announced and publicized. And nearly half of these jobs, 40,000, were created in small service sectors, particularly maintenance and repair and commerce. This fuels doubts about the quality and stability of these positions. The already oversized public administration, for its part, absorbed 20,000 jobs.
Regarding public finances, he estimates that without adjusting accounts by eliminating exceptional revenues generated by the sale of confiscated assets, the budget deficit would be 8.37% instead of the announced 6.67%.
Finally, one thing is certain: with the revolution, citizens aspired to a better life, even more difficult to achieve today. This fuels their concerns. To this effect, the former governor relativizes: "The room for maneuver is shrinking. Today, we have a chance to get out of this, but I'm not sure we will have that possibility in a few months."
Ridha MAAMRI.
© Copyright La Presse
Africatime.com
Published March 19, 2013.
Posted online March 20, 2013.
