A Difficult but Necessary Economic Recovery
Leila El Houssi 19 July 2017

“The monarchy was abolished at the behest of the people. It was because of that same will of the people that the Tunisian Republic was born.” It was with these words that, on July 25th, 1957, the president of the Constituent Assembly, Jellouli Fares, officially announced the beginning of a new era for Tunisia. Having recently cast off colonial rule, the Tunisian people seemed to have regained control over their own sovereignty and at last hoped to experience democracy and total independence. Habib Bourguiba became the president of the Tunisian Republic, implementing “soft authoritarianism” policies during his mandate.

Nowadays, sixty years after that statement, Tunisia is going through a delicate passage, experiencing a complex democratic transition process.

In the country that was the pioneer of the Arab Springs, the situation appears to be relatively stable in spite of a number of crises reported at both an economic and political level. Relaunching the economy is a priority on the government’s agenda. Economic growth and unemployment are constantly listed as the two main worries among Tunisian citizens. Overall unemployment is very high (15.5%), while it is even higher among young graduates (over 30%).

In September 2016, the Minister for Development, Investment and International Cooperation, Fadhel Abdelkefi, said that the country is in a “state of economic emergency” with arduous growth at around 1.1% and emphasised the urgent need to “regain access to national and international investments.” National debt, which is currently over 60% of GDP, has doubled over the past five years, rising from 25 billion dinars (10 billion euros) to 55 billion dinars (over 22 billion euros), mainly due to increases in the total wage bill for state employees, which has risen from 6 billion dinars (2.5 billion euros) to over 13 billion dinars (5.3 billion euros). This now amounts to over 15% of the GDP and to about 45% of state expenditure. Tourism and private investments are key factors in increasing currency reserves.

According to the Tunisian National Institute of Statistics (ISN), inflation stabilised at 4.8% in March 2017 with a 0.6% increase compared to the previous year. The rise in inflation has been caused mainly by a 4.9% increase in the price of food and a 2.4% increase in health services. The rise in the cost of energy supplies and food has resulted in a worrying deficit in the balance of payments. The economy has been driven by agriculture, the mining sector and services, while growth has been slow in manufacturing .

Following tensions originating at a regional level and the 2015 terrorist attacks on the Bardo Museum and the beach at Port El Kantaoui, tourism – which until now had guaranteed 400,000 jobs and employed 15% of the labour force – also dropped by 50% in 2016 compared to previous years. The National Tourism Agency (ONTT) has stated that revenue from the tourism sector amounted to 730 million euros for the first nine months of 2016, down 8% compared to the same period in 2015.

According to the Italian Foreign Ministry’s information concerning foreign markets, “the gradual tapering of reserves has resulted in the Tunisian Central Bank (BCT) abandoning policies aimed at a strong dinar (supported artificially) and to not intervene as far as the depreciation of the Tunisian currency is concerned, which since January has fallen almost 11% against the euro. For the moment however, the dinar’s devaluation does not appear to have resulted in positive effects on the balance of trade and exports in terms of competitiveness.”

The main challenge currently faced by Tunisia is without doubt an economic one. In an attempt to attract a flow of private investments, in November 2016 the government organised the “Tunisia 2020” investment conference, presenting an image of a country capable of offering significant trade opportunities. The Tunisian government is therefore trying to once again re-start the foreign investment flow and create new jobs all over the country. Mourad Frai, president of the Tunisian-Italian Chamber of Commerce, has said that, “the intention of this conference was to ensure Tunisia’s return to the global investment map.” In this sense there seems to be a change of direction confirmed by the World Bank’s predictions that expect growth in Tunisia to reach 3% in 2017 and almost 4% in 2018.

This objective involving the country’s economic re-launching has also been assisted by the coming into force on April 1st, 2017, of a new law on foreign investments, which, as Mourad Frai explains, indicates the choice made “to concentrate on financial advantages and bureaucratic facilitations (fewer permits, the ‘tacit consent’ rule for the approval of a project, and one-stop-shop interlocutors)”. This law allows foreigners producing goods for export to enjoy tax breaks (10% instead of the 25% tax on goods sold in Tunisia). There is also a ten-year tax exemption for those financing projects worth more than 20 million euros or that employ at least 300 people.

Economic revival is needed to consolidate the democratic experience in a country that seems to be the positive exception in the region, but that is dealing with difficult situations both at an international level and at home. On the one hand, Libya’s instability and uncertainty in Algeria affect Tunisia, which is set between two fires. On the other hand, there is serious concern about the significant number of young Tunisians who have joined Daes’h, enlisting through the web created by social networks, mosques, a number of cultural associations or prisons. The scepticism of the young, arising from the difficult situation experienced by the labour market, has paved the way for despair, creating a humus in which the recruiters of terror have found it easy to move around. In the meantime, many of these young people who had travelled to Syria are now returning home. In December 2016, Tunisia’s President Essebsi, albeit asserting that the right to return is a constitutional one, stated that Tunisia “will take all the necessary precautions to ensure that jihadists returning from Syria, Libya and Iraq are neutralised by the enforcement of anti-terrorism laws.”

It was precisely “security” and “war on terror” issues that U.S. President Donald Trump discussed with Essebsi. According to a White House statement issued on February 17th, 2017, “The two presidents discussed Tunisia’s democratic transition and our counterterrorism partnership.” Tunisia’s president was the first from a country in this region to speak on the telephone to the new American president whose immigration policies contained in the controversial “Muslim ban” are causing widespread criticism.

To this one must add other problems such as widespread smuggling and corruption that have once again emerged following the uprising and that were already deeply-rooted in the country. Prime Minister Youssef Chahed has committed to implement anti-corruption operations – already renamed “Clean Hands” – which have resulted in dozens of arrests in Tunisia. Last May, Chahed said, “there are no alternatives in the war on corruption; there is either corruption or the state, corruption or Tunisia and like all Tunisians I have chosen Tunisia.”

There is, however, a great deal of scepticism in civil society as well as among intellectuals as it is thought that this operation is just a façade. In any case, the battle against corruption embarked on by the government in recent months expresses a political desire to answer the profound social malaise that for so long has gripped the new Tunisia.

Translated by Francesca Simmons 



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