IMF: Tunisia’s Economic Burdens

Sep 13, 2012

On Sept. 5, the International Monetary Fund published a report on Tunisia’s post-uprising economic and social challenges. Tunisia’s economic prospects are now improving due to increased government spending and tourism revenues. But unemployment remains high at 19 percent overall and more than 40 percent among youth. The following are excerpts from the IMF survey.

Tunisia’s revolution has ushered in hopes for more inclusive growth, greater job opportunities, and better governance.

The country has moved steadily forward with its political transition, including through peaceful national elections, the formation of a coalition government, and the authorization of more than 100 new political parties.

But the revolution has brought about economic and financial uncertainty, and downside risks to the outlook loom large amid a legacy of social and economic challenges and increased vulnerabilities, the IMF said in its annual report on the state of the economy. Nevertheless, stepped-up government spending and a rebound in tourism have helped improve prospects for Tunisia’s economy this year and next.

Tunisia experienced a difficult 2011

Domestic unrest and conflict in neighboring Libya took a heavy toll on the economy, with Tunisia’s economic activity contracting by 1.8 percent last year as tourism and activity in other sectors affected by strikes declined sharply.

Policy mix to support recovery and preserve financial stability

In 2012, growth is expected to reach 2.7 percent in 2012, thanks to a gradual rebound in tourism and foreign direct investment inflows and increased public investment, said Joël Toujas-Bernaté, the IMF’s mission chief for Tunisia. “But the economic downturn in Europe—Tunisia’s main trading and investment partner—coupled with social tensions and political uncertainties, substantial weaknesses in the financial sector, and a wait-and-see attitude of investors, will weigh on the country’s near-term growth outlook.”

 

Laying the ground for comprehensive reforms

Tunisia’s medium-term economic growth potential remains very favorable, but unleashing it requires continued macroeconomic stability coupled with comprehensive structural reforms to foster private sector investment. Such reforms include

• improvement in governance and the business environment;

• reforms of the labor market and education system to address the labor skills mismatches; and

• a strengthening of the financial sector.

Click here for the survey.

 

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