Tunisia economy shows promise but more reforms needed, says OECD

Tunisia’s gross domestic product growth is expected to continue.
Sunday 08/04/2018
Containers are seen at a Tunisian port terminal in Bizerte, on March 27. (Reuters)
Containers are seen at a Tunisian port terminal in Bizerte, on March 27. (Reuters)

TUNIS - While Tunisia’s economy is showing signs of recovery, authorities need to continue with reforms to cement long-term growth and reduce unemployment, a report by the Organisation for Economic Cooperation and Development (OECD) stated.

The report said Tunisia’s gross domestic product growth was expected to continue but warned of “substantial challenges posed by weak job creation, high unemployment and unsustainable public finances.”

“The Tunisian economy has shown great resilience to both internal and external challenges,” OECD Acting Chief Economist Alvaro Pereira said in a release. “Reinforcing today’s economic recovery will require a quicker pace of reforms, with priority given to actions to improve the business environment. Job creation and regional development will be the keys to making the economy more efficient and more inclusive.”

International Monetary Fund-backed reforms, including austerity measures and a reduction in public spending, fuelled unrest across Tunisia. In January, implementation of a new budget caused price increases for basic goods and led to violent protests in many regions. Demonstrators railed against perceived corruption and neglect, saying the poor were bearing the brunt of the country’s economic woes.

The government announced aid programmes worth $70.3 million for the poor and middle class but many have yet to feel the effects.

An International Monetary Fund (IMF) official said Tunisia’s currency, which lost 20% of its value compared to the euro in 2017, would need to further depreciate if the economy were to pick up this year.

“I don’t think that we need to see a big downward movement to equilibrium. I think we are not too far from it,” Bjorn Rother, the IMF’s Tunisia mission chief, told Bloomberg News. “I also don’t think we need to see an abrupt adjustment.”

The OECD pointed to a growing tourism sector and potential upside risk from stabilisation in Libya as signs for optimism but, with dwindling foreign currency reserves and climbing inflation, serious challenges remain.

The Tunisian Association of Free Pharmacists announced that contraceptive pills were out of stock in pharmacies. The shortage, the association said, was because of the Central Pharmacy’s outstanding debts to foreign suppliers, some of which threatened to cut supplies of vital medicines. “Some laboratories are threatening to leave Tunisia,” the group said in a statement.

Tunisian politicians, with their sights on presidential and parliamentary elections next year, fear that austerity moves could push a restive population to the brink. They are bracing for long-delayed municipal elections in May, which could result in new voices weighing in on Tunisia’s economic issues and a significant power transfer to local authorities.

A high number of young people and women candidates have registered for the election, data from the Independent High Authority for Elections indicate.

“The municipal elections are the cornerstone of local governance to improve the conditions Tunisians live in,” independent candidate Mounia al-Rabhi told Al-Monitor. “Municipal elections will give youths their first chance to change the political decision-making authority.”