Tunisia’s economic and liquidity prospects have seen improvements, but significant challenges persist, impacting short and medium-term growth forecasts. The country faces high external debt, weak public finances, and sluggish GDP recovery, projected at 1.6% this year. Continued reliance on domestic banking for financing and reluctance to adopt critical reforms further escalate economic risks, leading to a 6/7 political risk classification by Credendo.
Tunisia has seen some improvement in its economic and liquidity conditions this year, leading to increased confidence regarding its external obligations. However, significant challenges remain that dampen the short- and medium-term economic outlook. The country’s high external debt, weak public finances, and sluggish growth continue to pose obstacles for economic stability.
Although Tunisia is expected to recover its real GDP to pre-pandemic levels by 2024, its economic recovery remains slow compared to its North African peers, all of which recovered their economies two years prior. The projected 1.6% real GDP growth this year is primarily fueled by a robust tourism sector and private remittances, which have also helped sustain foreign exchange reserves.
Despite these developments, Tunisia’s economic outlook remains weak due to persistent socioeconomic challenges. Projections indicate only a 1.6% real GDP growth in 2025, as overall growth is expected to struggle, averaging less than 1.5% annually. Political instability and lack of investment have hindered economic performance since the Jasmine Revolution, with additional external shocks exacerbating the conditions.
Tunisia’s financial situation is precarious, marked by high external debt expected at 83.7% of GDP in 2024 and recurring fiscal deficits at 6% of GDP. The government plans to address fiscal pressures through tax reforms but hesitates to implement critical IMF-recommended reforms due to fears of civil unrest amid ongoing socioeconomic difficulties.
Increased reliance on the domestic banking sector for financing public shortfalls threatens to destabilize the sector and limit private sector growth. An alarming shift towards unconventional economic measures is noted, including a proposal limiting the independence of the central bank in monetary and foreign exchange policy, which may further jeopardize economic stability.
In light of these ongoing vulnerabilities and the lack of significant progress in improving macroeconomic stability, Credendo has retained its ST and MLT political risk classifications for Tunisia at 6/7, reflecting the ongoing risks associated with Tunisia’s economic landscape.
Tunisia’s economic situation remains fragile, marred by high external debt, weak public finances, and slow growth recovery. Although positive developments in confidence and liquidity have emerged, significant risks persist due to socio-political factors and external pressures. The government faces challenges in implementing necessary reforms while managing public dissatisfaction and fiscal responsibilities. Overall, Tunisia’s prospects remain constrained, meriting cautious scrutiny by financial analysts.
Original Source: credendo.com
