Tunisia is expected to face the lowest economic growth in the southern Mediterranean, with projected rates of 1.8% for 2025 and 2.2% for 2026, according to the EBRD. The country is experiencing a significant fiscal deficit and high inflation. Tunisia has rejected an IMF financial deal, leading to increased domestic borrowing and central bank intervention, echoing Algeria’s monetary policies.
The Tunisian economy is struggling significantly under the influence of President Kais Saied’s consolidation of power. According to the European Bank for Reconstruction and Development (EBRD), Tunisia is set to perform the worst in the southern Mediterranean region.
While the southern Mediterranean is expected to experience economic growth of 3.7% in 2024 and 4.1% by 2026, Tunisia’s growth projections are considerably lower, with only 1.8% for 2025 and 2.2% for 2026 as per EBRD estimates.
Key macroeconomic indicators portray a bleak scenario, with inflation in Tunisia reaching 16% in the latter half of 2024. Additionally, a fiscal deficit is projected at 6.3% of GDP, along with public payroll expenditures amounting to 13.3% of GDP.
Tunisia has declined an IMF offer of a $1.9 billion financial package, which mandated necessary reforms in subsidies and the civil service sector. Instead, the government has resorted to domestic loans amidst a rising foreign debt, which has climbed to 82.2% of GDP.
As part of his strategy, Kais Saied has controversially expanded his authority to the central bank, motivating parliament to pass legislation allowing direct lending to the treasury. This approach resembles Algeria’s money-printing tactics, which have weakened the local currency.
Foreign exchange reserves in Tunisia have stabilized at 25 billion dinars (approximately $7.6 billion), sufficient to cover about 3.5 months of imports. This stability comes at a time of increasing economic turmoil and uncertainty.
Tunisia’s economic prospects remain grim, as evidenced by its forecasted growth rates significantly trailing behind the southern Mediterranean average. High inflation, a considerable fiscal deficit, and the rejection of an IMF deal compound these challenges. Furthermore, the government’s shift to local borrowing and unconventional central bank practices heighten concerns about the future value of the dinar and overall economic stability.
Original Source: northafricapost.com
