Tunisia: Growth to rise to 3% this year and 4.5% in 2015, according to the IMF
9 May 2014
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The growth rate of the Tunisian economy is expected to rise slightly to reach 3% this year, according to the International Monetary Fund (IMF) in its report on the economic outlook for the Middle East and North Africa region. This rate will improve further to reach 4.5% in 2015, according to the same forecasts.
Regarding the increase in consumer prices, it is expected that its rate will stabilize at 5.5% this year, to fall further in 2015 and reach 5.0%.
As for the budget deficit, it will widen to 6.8% of GDP in 2014, to ease and return to 3.8% of GDP in 2014.
Finally, regarding the current account balance, the IMF forecasts a rate of -6.8% of GDP in 2014 and -3.8% of GDP next year.
In its report, the International Monetary Fund said it is spotting the first signs of good news from Arab states undergoing political change, including Tunisia after the poor economic performance in the wake of the uprisings that shook the region in 2011.
"After three years, we are starting to see positive signs and some stabilization, but we need to move from growth to job creation," said Masood Ahmed, director of the IMF's Middle East and Central Asia department. "Stabilization without job growth will not be sustainable," he said.
However, various internal and regional factors will continue to weigh on investor confidence in oil-importing countries, particularly Arab countries in transition (Tunisia, Egypt, Jordan, Libya, Morocco, Yemen). The braking effect of unresolved structural problems and governance issues weighs on the business climate and, in some cases, prevents exports, tourism and FDI from fully benefiting from the improvement in economic growth among trading partners. The persistence of high unemployment fuels social tensions, which often manifest themselves in strikes.
In these countries, economic growth, which remained sluggish in 2013, has not yet returned to its historical average, which is close to 5%. Even if it did, growth would not be sufficient to reduce a stubbornly high unemployment rate and raise living standards in the region. A strong surge in activity capable of raising the growth rate to at least the average level of other emerging and developing countries is necessary to reduce the region's economic difficulties and significantly reduce unemployment.
This will require increasing exports and job-creating investments, based on structural changes to raise economic potential.
Political uncertainty and security problems have continued to curb economic activity. A whole series of internal factors weigh on confidence, including difficult political transitions, unresolved structural problems, and the intensification of social unrest and insecurity, notes the IMF.
Growth relied mainly on domestic demand in 2013. Unemployment remained high, but significant remittances from expatriate workers, subsidies and public sector wage spending continued to support consumption. Investment remained moderate due to low confidence. The external sector hardly contributed to growth due to low competitiveness (due in some cases to currency overvaluation) and heavy import bills.
Public debt continued to grow in 2013, leading some countries to start putting their public finances in order.
Tax revenues remain low due to sluggish economic activity, while the high amount of subsidies and the public sector wage bill have gradually dominated spending over the past three years.
Faced with the erosion of buffers and despite political difficulties, a large number of countries have undertaken to reform subsidies while better targeting social protection. Significant external vulnerability factors remained present in 2013, even though the improvement in the external environment and funding from donors provided some respite. Exports, tourism and foreign direct investment (FDI) gradually recovered as the global situation improved, particularly in the euro area; however, serious security problems limited progress in Egypt and Tunisia, especially in the tourism sector.
In the end, economic growth will remain moderate in 2014, but it will be based on a broader base, predicts the international financial institution. Consumption will remain the main driver of growth, but, for the first time since the beginning of the Arab Awakening, investment is expected to increase. Exports and tourism should also increase thanks to increased demand from trading partners, particularly in Europe and the GCC.
Public investment will increase throughout the region thanks to donor funding and recent subsidy reforms. Tunisia plans to increase public investment while reducing generalized subsidies and better targeting social assistance.
Private investment is also expected to strengthen, but at a more gradual pace and provided that reforms are implemented and confidence improves. As political transitions find their balance, it is likely that uncertainty will decrease. The recently adopted constitution in Tunisia is a positive sign. In addition, recent structural reforms are beginning to bear fruit and signal the direction of action that the authorities intend to take in the future.
The reallocation of resources in favour of public investment should facilitate job creation. Measures to increase tax revenues are focused on eliminating exemptions, eliminating tax loopholes and strengthening administration, which should ultimately improve the business climate. Fiscal consolidation should also help strengthen confidence by increasing buffers and improving access to bank credit to finance private investment. However, to succeed, the gradual consolidation of public finances must be anchored in credible medium-term plans. It is essential that external and internal funding be available for fiscal consolidation to progress at a sustained pace, estimates the IMF.
Africanmanager.com
Published on May 7, 2014.
Posted online on May 9, 2014.
Regarding the increase in consumer prices, it is expected that its rate will stabilize at 5.5% this year, to fall further in 2015 and reach 5.0%.
As for the budget deficit, it will widen to 6.8% of GDP in 2014, to ease and return to 3.8% of GDP in 2014.
Finally, regarding the current account balance, the IMF forecasts a rate of -6.8% of GDP in 2014 and -3.8% of GDP next year.
In its report, the International Monetary Fund said it is spotting the first signs of good news from Arab states undergoing political change, including Tunisia after the poor economic performance in the wake of the uprisings that shook the region in 2011.
"After three years, we are starting to see positive signs and some stabilization, but we need to move from growth to job creation," said Masood Ahmed, director of the IMF's Middle East and Central Asia department. "Stabilization without job growth will not be sustainable," he said.
However, various internal and regional factors will continue to weigh on investor confidence in oil-importing countries, particularly Arab countries in transition (Tunisia, Egypt, Jordan, Libya, Morocco, Yemen). The braking effect of unresolved structural problems and governance issues weighs on the business climate and, in some cases, prevents exports, tourism and FDI from fully benefiting from the improvement in economic growth among trading partners. The persistence of high unemployment fuels social tensions, which often manifest themselves in strikes.
In these countries, economic growth, which remained sluggish in 2013, has not yet returned to its historical average, which is close to 5%. Even if it did, growth would not be sufficient to reduce a stubbornly high unemployment rate and raise living standards in the region. A strong surge in activity capable of raising the growth rate to at least the average level of other emerging and developing countries is necessary to reduce the region's economic difficulties and significantly reduce unemployment.
This will require increasing exports and job-creating investments, based on structural changes to raise economic potential.
Political uncertainty and security problems have continued to curb economic activity. A whole series of internal factors weigh on confidence, including difficult political transitions, unresolved structural problems, and the intensification of social unrest and insecurity, notes the IMF.
Growth relied mainly on domestic demand in 2013. Unemployment remained high, but significant remittances from expatriate workers, subsidies and public sector wage spending continued to support consumption. Investment remained moderate due to low confidence. The external sector hardly contributed to growth due to low competitiveness (due in some cases to currency overvaluation) and heavy import bills.
Public debt continued to grow in 2013, leading some countries to start putting their public finances in order.
Tax revenues remain low due to sluggish economic activity, while the high amount of subsidies and the public sector wage bill have gradually dominated spending over the past three years.
Faced with the erosion of buffers and despite political difficulties, a large number of countries have undertaken to reform subsidies while better targeting social protection. Significant external vulnerability factors remained present in 2013, even though the improvement in the external environment and funding from donors provided some respite. Exports, tourism and foreign direct investment (FDI) gradually recovered as the global situation improved, particularly in the euro area; however, serious security problems limited progress in Egypt and Tunisia, especially in the tourism sector.
In the end, economic growth will remain moderate in 2014, but it will be based on a broader base, predicts the international financial institution. Consumption will remain the main driver of growth, but, for the first time since the beginning of the Arab Awakening, investment is expected to increase. Exports and tourism should also increase thanks to increased demand from trading partners, particularly in Europe and the GCC.
Public investment will increase throughout the region thanks to donor funding and recent subsidy reforms. Tunisia plans to increase public investment while reducing generalized subsidies and better targeting social assistance.
Private investment is also expected to strengthen, but at a more gradual pace and provided that reforms are implemented and confidence improves. As political transitions find their balance, it is likely that uncertainty will decrease. The recently adopted constitution in Tunisia is a positive sign. In addition, recent structural reforms are beginning to bear fruit and signal the direction of action that the authorities intend to take in the future.
The reallocation of resources in favour of public investment should facilitate job creation. Measures to increase tax revenues are focused on eliminating exemptions, eliminating tax loopholes and strengthening administration, which should ultimately improve the business climate. Fiscal consolidation should also help strengthen confidence by increasing buffers and improving access to bank credit to finance private investment. However, to succeed, the gradual consolidation of public finances must be anchored in credible medium-term plans. It is essential that external and internal funding be available for fiscal consolidation to progress at a sustained pace, estimates the IMF.
Africanmanager.com
Published on May 7, 2014.
Posted online on May 9, 2014.
