Tunisia is anticipated to be the least economically performing country in the southern Mediterranean with a projected growth of 1.8% in 2025 and 2.2% in 2026. Inflation has risen to 16%, and the fiscal deficit is expected at 6.3% of GDP. The government rejected an IMF deal, leading to increased domestic loans and risks reminiscent of Algeria’s economic policies.
The Tunisian economy is struggling significantly, primarily due to the consolidation of power by President Kais Saied. The European Bank for Reconstruction and Development (EBRD) predicts that Tunisia will experience the weakest economic performance in the southern Mediterranean region. In contrast to the broader regional growth forecast of 3.7% in 2024, Tunisia is projected to grow merely by 1.8% in 2025 and 2.2% in 2026.
Macroeconomic conditions in Tunisia are troubling, with inflation soaring to 16% in the second half of 2024. The fiscal deficit is anticipated to reach 6.3% of GDP, while the public payroll will comprise 13.3% of GDP. In light of economic instability, Tunisia has rejected an International Monetary Fund (IMF) agreement of $1.9 billion, which called for necessary reforms in subsidies and civil service employment.
As Tunisia’s foreign debt escalates to 82.2% of GDP, the government has opted to rely on domestic loans rather than international support. President Saied has broadened his authority by pressuring the central bank to pass legislation that allows for direct loans to the treasury. This approach resembles Algeria’s policy of money-printing, which had detrimental effects on their currency’s value.
Despite these challenges, Tunisia’s foreign exchange reserves remain steady at 25 billion dinars (approximately $7.6 billion), which is sufficient to cover 3.5 months of imports. However, the economic outlook remains bleak, raising concerns about the country’s financial stability and growth potential in the future.
In summary, Tunisia’s economic forecasts indicate a troubling trajectory, marked by low growth rates and high inflation. The government’s rejection of reform measures proposed by the IMF, along with increased reliance on domestic borrowing, presents significant risks to economic stability. Without addressing these challenges, Tunisia may continue to lag behind its regional counterparts.
Original Source: northafricapost.com
