Rédaction Africa Links 24 with satarbf
Published on 2024-03-09 14:08:56
Below, we reproduce in full the translated summary of the report published last night in New York by the Economist Intelligence Unit (EIU) of a diagnosis and rather alarming predictions…
**POLITICAL STABILITY**
1- Nevertheless, the EIU expects President Kaïs Saïed to easily win re-election in the planned 2024 vote and remain in power throughout 2024-28.
2- The new constitution, largely drafted by Mr. Saïed (and adopted by referendum in 2022), weakens the role of parliament and places the armed forces, government, and judiciary under presidential control. Therefore, Mr. Saïed is expected to wield almost absolute power, further sidelining political parties and pursuing a populist program.
**ELECTION MONITORING**
3- The next legislative elections are planned for 2027, but their democratic importance will be limited due to the shift of constitutional power away from parliament. The December 2022 vote was boycotted by political parties, with an electoral turnout of only 11.2%.
4- The Parliament was inaugurated in March but will remain effectively under the control of the president, giving Mr. Saïed a pliable legislature until the end of 2027. Ongoing authoritarian repression means the incumbent is likely to win the planned September 2024 presidential election, with Mr. Saïed potentially intending to run unopposed in a pseudo-presidential vote. Unrest is therefore likely to increase as the election approaches.
**INTERNATIONAL RELATIONS**
5- Western countries’ support for Tunisia has dwindled in the face of Mr. Saïed’s increasingly erratic authoritarian regime, including his rejection of an agreed IMF program.
6- Concerns regarding irregular migration and the desire to prevent a deeper crisis in Tunisia will lead to modest disbursements from the EU as part of its long-term €900 million (US$1 billion) partnership agreement with Tunisia.
7- Similarly, the World Bank will provide some funds, although large-scale budgetary support will remain contingent on an agreement with the IMF.
**POLITICAL TRENDS**
8- The president continues to publicly reject the IMF’s “dictates” and continues to block standard consultations under Article IV with the Fund. The president will remain the primary decision-maker but has not provided a clear political program to address major macroeconomic imbalances and debt sustainability concerns.
9- Instead, he appears focused on the 2024 presidential election, seemingly unwilling to acknowledge the growing economic tensions facing the economy.
10- This is reflected in the absence of budgetary austerity measures in the 2024 budget despite significant unmet financing needs, and the need to pass new laws to enable the Central Bank of Tunisia (BCT) to provide US$2.3 billion to directly fund the budget.
**ECONOMIC GROWTH**
12- The economy faces multiple tensions. We expect unemployment and inflation to remain high, driven by domestic demand. Restricted access to financing, as well as currency shortages, will negatively impact business operations and public spending.
13- Relatively high interest rates and a weak global economy will act as growth headwinds, as will increasing water shortages and droughts affecting agricultural production.
14- Without an IMF program, concerns over macroeconomic stability and debt default risks will weaken confidence among domestic and foreign investors. Political turmoil will make prospects even more challenging.
**INFLATION**
15- We expect inflation to remain above 8% in 2024 and average 6.8% per year in 2025-28. Limited access to external financing over 2024-28 will slow authorities’ ability to reduce deficit monetization.
16- Supply shortages are likely to persist, given Tunisia’s reduced capacity to produce and import goods.
17- Some subsidy reforms will also exert upward pressure on prices in the coming years, compensating for the benefits of easing global commodity prices in 2024-28.
**EXCHANGE RATE**
18- The dinar will depreciate against the US dollar in nominal terms over the forecast period, with external imbalances and high inflation continuing to weigh on the currency.
19- The dinar was relatively stable against the US dollar in 2023, but we anticipate a 12.2% depreciation against the dollar by the end of 2024, to 3.8 TD: 1 $, and further appreciation to 4.27 USD: 1 $ by the end of 2028.
20- Risks to our base scenario are high, as the regime’s poor economic record will keep confidence in the dinar low, with much depending on maintaining adequate foreign exchange reserves, which is uncertain.
**EXTERNAL SECTOR**
21- Growth in Tunisia’s offshore sector exports (which benefit from more favorable regulatory and customs rules and easier access to foreign currencies) will slow in 2024 in line with weak growth in key European markets before picking up pace in 2025-28.
22- This should support steady growth in exports of mechanical and electrical products (largely components for automotive and aerospace), textiles, and agro-industrial goods.
23- Non-offshore sector prospects are less positive, with a combination of strikes, funding shortages, and stagnant production expected to restrict exports of energy, phosphates, and other mining products.
24- Nonetheless, total exports are expected to increase from $20.3 billion in 2024 to $29.3 billion in 2028.
A rather bleak outlook…
Tunisia Economy, Politics, and GDP Growth Summary
Economist Intelligence Unit
Read the original article(French) on Tunisie Focus
