Tunisia’s Real GDP Should Grow 2 Percent in 2021, If Covid-19 Pandemic Recedes (AfDB Report )

Tunis/Tunisia — Tunisia’s real GDP should rebound and grow 2% in 2021 and 3.9% in 2022, if the pandemic recedes and allows a restart of the global economy, especially in Europe, upon which Tunisia relies heavily, reads the report of the African Development Bank (AfDB) entitled: African Economic Outlook 2021, From Debt Resolution to Growth: The Road Ahead for Africa.

“The COVID-19 pandemic has infected many Tunisians and severely damaged the economy in this North African nation, which is heavily dependent on Europe.

Real GDP contracted by 8.8% in 2020, after growing 1% the year before, due to the general decline in economic activity and the hardening of financing conditions designed to fight inflation.”

Inflation is expected to continue to decline over the medium term to around to 5.7% in 2021 and 4.3% in 2022, due to prudent monetary policy. The budget deficit is expected to improve to 8.6% of GDP in 2021 and 8% in 2022.

The current account deficit is also expected to narrow over the medium term to 4.1% in 2021 and 3.6% in 2022 as the recovery continues.

According to the report, the major risks to this scenario are “a third wave of the pandemic, political instability at the national and regional level, an increase in popular protests against social conditions, insufficient access of companies to financial resources, and a slower-than-expected recovery of European economies on which Tunisian exports depend heavily.”

The Tunisian public debt, 70% of which is external, will reach 90% of GDP in 2020, continuing the worrisome upward trend that began in 2011, when it was about half as big.

Tunisia is vulnerable to exogenous shocks, mainly to currency risk because of the high concentration of external debt.

The cost of servicing the debt absorbs around 28% of the budget, at the expense of development spending necessary to improve Tunisia’s long-term competitiveness.

“The financial difficulties of public establishments and enterprises are another area of concern. At the end of 2019, the debt of public enterprises represented 13% of GDP.

However, the recent external debt sustainability analysis conducted by the IMF concluded that Tunisia’s debt is sustainable because a large portion of it is concessional and the portfolio has relatively long maturities.”

Production fell in all sectors except agriculture