Political uncertainty, work stoppages cast shadow over Tunisia’s economic growth

Tunisia’s pace of economic growth is not sufficient to reverse the more than 15% unemployment rate.
Saturday 26/05/2018
Young Tunisian vendors selling fruit on the side of a highway south of Tunis, last February. (Cain Burdeau via AP)
Young Tunisian vendors selling fruit on the side of a highway south of Tunis, last February. (Cain Burdeau via AP)

TUNIS - Tunisia’s economy registered strong growth during the first quarter of 2018 but disputes in the country’s governing coalition and work stoppages in phosphate production prompted concerns whether the momentum can continue.

Tunisia’s GDP grew 2.5% year-on-year in the first quarter of 2018, up from 2% during the same period last year. Though marginal, the growth is an indication that the government led by Prime Minister Youssef Chahed has had at least some success in improving an economy that has been unsteady since the 2011 revolution.

The pace of economic growth is not sufficient, however, to reverse the more than 15% unemployment rate, which particularly affects recent university graduates and the people in Tunisia’s interior.

While Tunisia has been hailed as the rare success of the uprisings in the Arab region in 2011, citizens have become disillusioned with government after years of steep inflation, a foundering currency and sluggish growth. Political infighting has further discredited the political class.

This year’s economic growth was based on a 3.3% increase in commercial services, mainly due to improvement in the tourism sector, and a 6.4% expansion of financial services.

The country’s manufacturing industry registered a 2.5% increase and agriculture business saw a 16.7% gain mainly because of a strong olive oil harvest, which the Ministry of Agriculture estimated at 280,000 tonnes, almost three times the previous year.

Economists said economic growth would have been stronger if not for protests in the phosphate-producing region of Gafsa, which decreased phosphate output and affected connected industries. Tunisia’s National Institute of Statistics said chemical industries that depend on phosphate production contracted 23.9% in the first quarter.

Young protesters calling for jobs brought Tunisia’s phosphate industry to a halt for almost a month earlier this year with sit-ins at installations operated by the state-run Gafsa Phosphate Company, the sole Tunisian phosphate producer.

With up to 8 million tonnes of production per year, Tunisia was once one of the world’s largest producers of phosphate minerals, which are used to make fertilisers, but its market share has fallen dramatically after 2011.

Tunisia was hit by mass protests in January after the government announced a series of reform measures that included tax hikes on some basic goods, fanning inflation. The riots subsided after the government announced $70 million in aid to help poor families.

The Tunisian prime minister promised that “2018 will be the last painful year” and said Tunisia would return to pre-2011 growth levels by 2020.

“The most sticky issue is the inflation that is causing the most worries. The inflation rate will be 7% at end of 2018 before slowing to 6.1% in 2019,” said economist Houcine Ben Achour. “Such respite in the economy must however continue and be preserved because the International Monetary Fund (IMF) takes into account the reforms that must be implemented this year and in 2019.”

Bolstered by a $2.9 billion IMF loan, Tunisia is looking to reduce subsidies, overhaul its pension system and shrink its bloated public sector but there are worries that social unrest slowed the pace of reform.

The IMF was criticised by the powerful Tunisian General Labour Union and other leftist groups. However, independent economists said the IMF and other international lenders were showing support for Tunisia.

Tunisia has missed some targets set with the IMF in 2016, but IMF Managing Director Christine Lagarde has committed to helping make Tunisia’s reforms more socially balanced amid public anger.

Criticism directed at Chahed, however, was not just from the left but also from members of his own party and some see his survival as prime minister as increasingly uncertain ahead of presidential and parliamentary elections next year.

Hafedh Caid Essebsi, the influential son of Tunisian President Beji Caid Essebsi and leader of the Nidaa Tounes party, recently lambasted Chahed for “multiple failures” to turn around the economy.

Interestingly, the Islamist Ennahda Movement, which is a partner in the unity government, voiced qualified backing for Chahed, though many say it did so as a political tactic. Ennahda previously supported embattled prime ministers to gain leverage in the governing coalition.

Ennahda insisted that it is supporting Chahed out of concern for “government stability.” however.

Earlier this year, Chahed made what now seems like an ominous prediction for himself, saying: “Tunisia had everything to succeed. Only one commodity is lacking for such success to be sustained: government stability.”

“Tunisia is the country of lost time,” the Al Chourouk daily stated in a front-page headline on the government’s future. “Seven governments in seven years and each government takes several months to complete its lineup,” it added.