2023-12-01 10:07:36
As the country oscillates between the imperative for profound reforms and influences and factors coming from elsewhere, the path to economic recovery is taking shape in the heart of a complex landscape where optimism and reality meet.
As part of a recent conference on “Ticad 8 and revival of the Tunisian economy”, attention was turned to Tunisia, where an in-depth exploration of its economic situation was undertaken. This meticulous analysis shed light on the most pressing aspects while looking ahead, providing a crucial forum to closely examine the critical issues facing the country.
A decade of resilience and questioning
Tunisia, over the past decade, has navigated through tumultuous waters, marked by major events, such as the revolution of January 2011 and the elections of October of the same year. While this period undoubtedly presented major challenges, it must be recognized that the nation was not free of problems before 2011. As several economists have so well pointed out, “no one is perfect.” These critical moments, however, have produced notable economic consequences, highlighting the need for careful consideration of the path forward.
However, in this difficult context, crucial sectors of the economy have not faltered. Thousands, even hundreds of thousands of Tunisians have persisted in their activities, generating added value despite the ever-present difficulties. This perseverance demonstrates the deep commitment to the economic development of the country.
In this regard, Tunisia’s economic recovery is undeniably linked to the reaffirmation of the value of work. But it is worrying to note a weakening of this value, having disastrous repercussions on the economy. Faced with this situation, renewed confidence in the future is essential to instill hope and foresight into the future of the country and its citizens.
Tunisian youth, aware of the challenges, is and will remain a force that will actively work to meet the difficult but inevitable challenges that await it… Certainly, today, the phenomenon of brain drain is one of the major challenges. However, despite these departures, it is imperative to remain optimistic and rebuild what was destroyed during the dark decade. And there, Nietzsche’s words, “what does not kill you makes you stronger”, resonate as a call for resilience.
Crucial challenges for a more stable future
In recent years, Tunisia has been subject to significant external shocks, adding pressure to already existing vulnerabilities.
In 2022, although the country is gradually recovering from the shock of Covid-19, it must also face the problems caused by the war in Ukraine. And despite growth of 2.5%, indicating a recovery, it shows signs of running out of steam this year, marked by low agricultural production and the absence of reforms. These elements have led to a deterioration in employment, with an unemployment rate reaching almost 17%, accentuating the disparities between men and women, with women being more strongly affected.
At the same time, Tunisia is experiencing high inflation, estimated at around 9.5% on average for the current year, leading to a reduction in household purchasing power. To face these challenges, the Central Bank took measures, increasing its key rate by 175 basis points between spring 2022 and the beginning of 2023, which has complicated the situation for private investments. However, despite these challenges, an improvement in the current account was noted, resulting from the resilience of the Tunisian industrial fabric and effective export management. This improvement is also attributed to a compression of imports, due to falls in international prices, particularly in the field of energy and food products, as well as a slowdown in activity.
Regarding the outlook for next year, international institutions anticipate a slight decline. This is partly attributable to the conflict in the Middle East, which is generating uncertainties, particularly regarding energy prices globally. Although the year 2023 was marked by favorable elements, such as the resumption of tourism and the drop in international prices, these trends are not guaranteed for the following year, given the sharp deceleration in activity among Tunisia’s main trading partners and global price pressures.
Thus, currently, two major challenges face the Tunisian authorities. First, strengthening public finances is crucial, with positive signs despite persistent subsidy challenges. Then, the question of social equity and the growth of poverty, particularly in terms of employment in the west of the country, constitutes another major challenge. Both challenges require concrete actions, such as reforming state-owned enterprises and reassessing inequitable energy subsidies.
An urgent call for reforms
The findings of the Tunisian economy are therefore worrying, characterized mainly by a growth problem. Traditional drivers such as investment, exports and consumption are currently stalling, compromising any growth prospects. Recent financial statement results have been disappointing, reflecting a struggling economy.
One of the other major challenges lies in the debt, both public and external, accumulated over the years. The downgrading of Tunisia’s sovereign rating ten times in twelve years underlines the seriousness of the situation. Reports related to these downward revisions offer valuable advice on how to turn the situation around, but appear not to have been fully heeded.
It is clear that the Tunisian economy no longer fulfills its three fundamental roles: creating wealth, generating jobs and stimulating growth. Currently, it is experiencing negative growth, and growth projections for the coming year vary, but remain insufficient.
The economic challenge is thus complex, and the calculation shows that to maintain stability, growth must exceed 5.5%, taking into account the population growth rate of 1% and the average cost of external debt of 4.5%. . The current figures reveal a worrying situation, requiring growth well beyond the rates mentioned to catch up and restore balance. Investment, in particular, has fallen significantly, from 21% of GDP in 2010 to just 6.8% today. Similarly, overall national savings declined from 22% to around 8% of GDP. This trend reduces the country’s capacity to invest and creates a vicious circle.
The need for public investment is highlighted, as it is the prerequisite for encouraging the local private sector to invest. However, recent finance laws show minimal allocation for public investment, which hampers economic recovery.
Tunisia, despite its potential, seems not to take full advantage of opportunities, such as Ticad 8 (Tokyo International Conference on African Development), the Francophonie Summit, Tunisia 2020, and other investment forums. The emphasis is on organization rather than tangible results.
And in a rapidly changing global context, Tunisia seems to be struggling to adapt to new challenges, such as the emergence of new economic powers, the redistribution of alliances and environmental challenges. The choice between suffering and managing arises, and currently, Tunisia seems to be suffering more.
Reforms thus become imperative, although their social impact is feared. However, the social cost of inaction could be even more serious. The need to redirect resources towards investment rather than current spending is crucial to boost growth. Currently, as Tunisia discusses the 2024 finance law, concern persists and continued dependence on unidentified external resources. The need to reconnect with international donors is underlined, with particular emphasis on directing resources towards investment.
In conclusion, Tunisia must carry out profound and inevitable reforms to emerge from its current phase of subordination and begin to truly manage its economic situation. This is still true, at a time when the social cost of non-reforms could be more serious than the social repercussions of the reforms themselves. To do this, Tunisia is urged to redirect its resources towards investment rather than current spending and to reconnect with international donors to ensure essential financial support.
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