The World Bank (WB) has lowered its economic growth forecast for Tunisia to 1.2% in 2023, down from 2.3% in June 2023 (preliminary forecast), citing "very uncertain prospects". In its report, titled "Balancing Act: Jobs and Wages in the Middle East and North Africa When Crises Hit," released on Thursday, the WB noted that the Tunisian economy appears to be slowing "significantly" compared to trends in 2021 and 2022. According to the bank, this reflects difficult conditions related to the drought, particularly for the agricultural sector, uncertainties over debt financing, and the weak momentum of structural reforms. In the absence of financing agreements with the International Monetary Fund (IMF) and external financing, coupled with an uncertain global environment, Tunisia's public finances and external accounts will remain "fragile", the WB said. However, the budget deficit is expected to narrow to 5.6% of GDP in 2023, down from 6.6% of GDP in 2022. This is mainly due to the reduction of energy subsidies, lower real wages and an increase in tax revenues, according to the WB. Gross financing needs are projected to increase further to 16% of GDP in 2023, from 12.6% in 2022, due to significant external debt repayments. The current account deficit is projected to narrow to 4% of GDP in 2023 (from 8.6% in 2022), thanks to tourism and favourable terms of trade. Without reforms, growth projections would be even lower If Tunisia manages to overcome the drought and difficulties in external financing, it should reach a growth rate of 3% in 2024 and 2025. However, the WB warns that growth projections for 2023-2024 remain subject to significant downside risks. Indeed, these growth projections would be even "lower" if Tunisia does not implement "decisive" budgetary and fiscal measures. These reforms mainly involve reducing subsidies while maintaining them for vulnerable groups, achieving tax equity and restructuring public enterprises. Without reforms, it would be "difficult" to mobilise foreign currency financing, which could affect the Tunisian economy and employment.
Source: Agence Tunis Afrique Presse