A week ago, Fitch-Solutions published a voluminous report (74 pages in English) on the Tunisian economy, the present and the future, until 2033. This report entitled “Tunisia, Country Risk Report, Q1 2025” announces a significant rise in the value of the Tunisian dinar against the American dollar ($1 = 2.79 TD) and a slight drop in the key rate in 2025, if inflation passes below 6%. Among other news…
Event Moktar *
We summarize the essential findings and projections in 14 points.
1- The report foresees finds a rebound in the agricultural sector and tourism activity which will increase the growth rate of Tunisia's real GDP from 0.6% year-on-year to almost 2% for 2024.
2- The authors think that growth will then slow to 1.0% in 2025in particular due to tax increases which will further weaken the purchasing power of households and discourage investment, thus amplifying the negative impact of current budgetary and external structural problems on the economy.
3- Reducing the trade deficit energy will lead to a reduction in Tunisia's current account surplus, which will fall from 2.2% of GDP in 2023 to 1.3% of GDP in 2024 and to 0.7% of GDP in 2025.
4- Reducing the current deficitexternal support mainly from the European Union (EU) and strong foreign exchange reserves will enable the authorities to meet their foreign exchange obligations of more than $2.0 billion in 2025. Nevertheless, the external position remains extremely vulnerable to external shocks, such as rising global commodity prices.
5- The budget deficit of Tunisia will also gradually reduce, from 7.2% of GDP in 2023 to 5.7% of GDP in 2025, due to increased tax revenues and lower spending on subsidies. The debt-to-GDP ratio will increase to 82.9% of GDP by the end of 2025.
6- The authors anticipate that the dinar will gain points against the dollar American, if nothing changes in the recovery trends of the economic and investment sectors. Depreciative pressure on the dinar will increase in early 2025 as $1.0 billion in foreign currency payments are due.
7- The Central Bank of Tunisia (BCT) will maintain the key rate at 8.00% until the end of 2025, as inflation will slow only slightly from 6.5% y-o-y in December 2024 to 6.0% y-o-y in December 2025. The policy rate will be adjusted slightly as soon as l inflation falls below 6%.
8- On a political level, the authors of the report believe that the persistent rejection of painful reformsincreased recourse to national financing and tax increases risk further deteriorating socio-economic conditions. This will thus maintain the risk of demonstrations and social tensions throughout 2025.
9- The inability of the authorities to mobilize the necessary funds could weigh more heavily on Tunisia's external positionthe dinar and economic growth. Fixed investments will remain dependent on maintaining a stable security environment and reducing local union actions.
10- Recurring dependence on the Central Bank to finance the budget deficit and meet external debt payments risks destabilizing the macroeconomic situation. Persistent adverse weather conditions would weigh on agricultural production.
11- A further increase in inflation and more pronounced shortages of basic goods, particularly bread, could fuel social discontent. A sustained increase in unemployment in a context of sluggish economic growth could lead to protests and discontent denouncing the high cost of living and basic products.
12- The risks that weigh on these forecasts are on the rise. If the Central Bank of Tunisia decided to ease its monetary policy due to a stronger than expected fall in inflation (and/or political pressure), this would improve credit demand and, by extension, activity. investment. The share of investment in GDP is struggling to exceed 15%, compared to 26% in 2011.
13- Foreign support or investment more significant would lead to economic growth above 1.0% in 2025. On the other hand, a peak in external pressure due to a surge in energy prices in the event of a sudden escalation of geopolitical tensions, would weigh on the dinar, would fuel inflation and slow down economic activity.
14- The money supply (M2) will continue to growon average 8% per year, by 2033. According to Fitch projections, the dinar will trade below 2.8 US dollars from 2026. A note of hope, a perspective that must be valued for break with the depression which invades the dominant opinion among local economists.
Author's blog : Economics for Tunisia.
