Tunisia Faces Economic Hardships and Lowest Growth Prospects in Southern Mediterranean
Tunisia’s economy, under President Kais Saied, is projected to have the lowest growth in the southern Mediterranean, with forecasts of 1.8% in 2025 and 2.2% in 2026. Factors like high inflation, a substantial fiscal deficit, and declining foreign reserves are compounding the economic crisis. The government’s choice to seek domestic loans over IMF aid poses further challenges to the nation’s economic stability.
The Tunisian economy is currently experiencing significant challenges, primarily attributed to President Kais Saied’s consolidation of power. According to the European Bank for Reconstruction and Development (EBRD), Tunisia is projected to have the weakest economic performance in the southern Mediterranean region, forecasting growth at only 1.8% for 2025 and 2.2% in 2026, in contrast to the region’s expected growth of 3.7% in 2024 and 4.1% by 2026.
Macroeconomic factors in Tunisia are concerning, with inflation soaring to 16% in the latter half of 2024. The fiscal deficit is also projected to reach 6.3% of GDP, while the public payroll constitutes 13.3% of the GDP. Despite these challenges, Tunisia has declined an IMF package amounting to $1.9 billion, which called for reforms in subsidy and civil service sectors.
In light of its mounting foreign debt, which has escalated to 82.2% of GDP, the Tunisian government has opted to secure domestic loans instead. President Saied has extended his powers to influence the central bank, advocating for a law that would allow the bank to lend directly to the state treasury, a move that has drawn parallels with Algeria’s money-printing strategy, putting pressure on the value of the dinar.
Despite these difficulties, Tunisia’s foreign exchange reserves remain stable at 25 billion dinars (approximately $7.6 billion), sufficient to cover 3.5 months of imports. This stability faces scrutiny in light of the ongoing economic policies and inflationary pressures that threaten further destabilization of the economy.
In summary, Tunisia is facing significant economic difficulties, forecasted to lag behind its regional counterparts in growth. The combination of high inflation, fiscal deficit, and declining foreign investment creates a precarious economic environment. The government’s rejection of international financial assistance in favor of domestic loans and controversial central bank interventions could exacerbate the situation, highlighting the urgent need for reform and effective economic management.
Original Source: northafricapost.com
