TUNISIA ECONOMIC MONITOR The COVID-19 Global Pandemic Shock Summer 2020 Middle East and North Africa Region Tunisia Economic Monitor The COVID-19 Global Pandemic Shock With a Special Focus on the Economic Impact of COVID-19 in Tunisia and the Tunisia Infrastructure Diagnostic Review Summer 2020 Middle East and North Africa Region © 2020 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. 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TABLE OF CONTENTS Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix ‫الملخص التنفيذي‬ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii Résumé Exécutif . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii 1.  Recent Economic and Policy Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Real Sector and Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 External Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Public Sector Finances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Monetary Sector and Financial Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.  Outlook and Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Special Focus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Special Focus 1: The Macroeconomic Impacts of the COVID-19 on the Tunisian Economy . . . . . . . . . . . . .19 COVID-19 Spread in Tunisia: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Economic Impact of COVID-19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 Scenarios of Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 GDP and Sectoral Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 Public Finances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Tourism and Remittances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Banking Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Special Focus 2: Tunisia´s Infrastructure: Demonstrated Progress but Mounting Challenges . . . . . . . . . . .27 Reforms to Boost Return on Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Annex – Selected Economic Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 iii List of Figures Figure 1 GDP Growth Has Slowed to its Lowest Rate in Recent Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Figure 2 Growth in 2019 Was Driven by Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Figure 3 Key Manufacturing Sector Activity (Textiles and Mechanic & Electric) Slowed in 2019… . . . . . . . .2 Figure 4 …and Petroleum Extraction Declined to Close to Less than Half of its 2010 Level . . . . . . . . . . . . . 2 Figure 5 Tradable Services and Industries Were the Main Contributors to the 2020Q1 Contraction . . . . . .3 Figure 6 Potential GDP Growth Has Steadily Declined Over the Last Two Decades . . . . . . . . . . . . . . . . . . . .3 Figure 7 Unemployment Remains High Especially among Women and Graduates… . . . . . . . . . . . . . . . . . . .5 Figure 8 …and is Concentrated in the Interior Regions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Figure 9 The Current Account Deficit and Reserves Improved in 2019… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Figure 10 …as the Trade Balance Shrank in Most Sectors Due to Lower Imports . . . . . . . . . . . . . . . . . . . . . . .6 Figure 11 Tourist Arrivals Reached an All Time High Thanks to More Neighbor Visitors… . . . . . . . . . . . . . . . .7 Figure 12 … Leading to Higher Revenues While Remittances Grew Despite Growth Slowing in Europe . . . .7 Figure 13 EU Countries Are the Major Source of Tunisia’s Remittances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Figure 14 In 4M 2020 the Trade Deficit Reduced as Demand Weakened . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Figure 15 The Fiscal Deficit and Public Debt Marginally Improved in 2019… . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Figure 16 …as Revenues Improved Thanks to Higher Direct Tax Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Figure 17 Government Expenditures Is Dominated by Growing Wages… . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Figure 18 …while Subsidies and Transfers Remain High . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Figure 19 Consumer Price Inflation Declined in 2019… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Figure 20 …as BCT Pursued a Less Accommodative Stance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Figure 21 Liquidity and Credit Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 Figure 22 Euro/TND and USD/TND (Average Interbank Rate) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 Figure 23 The Stock Market Index Contracted in 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Figure 24 COVID-19 Directly Impacted Sectors Have Small Stock Market Presence . . . . . . . . . . . . . . . . . . . 16 Figure 25 Strict Lockdown Measures Have Limited COVID-19 Cases in Tunisia . . . . . . . . . . . . . . . . . . . . . . .20 Figure 26 Tunisia’s Health Security Ranks in the Bottom Half of World Rankings . . . . . . . . . . . . . . . . . . . . . .20 Figure 27 The COVID-19 Shock Transmits through Multiple Economic Channels . . . . . . . . . . . . . . . . . . . . . 21 Figure 28 Scenarios of COVID-19 Economic Impact in Tunisia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Figure 29 The Most COVID-19 Exposed Sectors Can Reduce Overall Growth Significantly . . . . . . . . . . . . . 23 Figure 30 Number of Jobs in Sectors Most Exposed to the Crisis (2019Q4) . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Figure 31 Sectoral Employment Elasticities (2011–2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Figure 32 Government Expenditures (TND Million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Figure 33 Government Revenues (TND Million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 Figure 34 Simulation of COVID Impacts on Public Finances and Financing Needs . . . . . . . . . . . . . . . . . . . . 25 Figure 35 SOE Wage Bill and Operating Expenses are High Relative to their Operations . . . . . . . . . . . . . . .25 Figure 36 Impact on Tourism Revenues (TND Million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Figure 37 Impact on Remittances (TND Million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Figure 38 Impact on Remittances (TND Million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Figure 39 Share of Tunisia’s Population Below the Poverty Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Figure 40 Tunisia’s Infrastructure Competitiveness Global Ranking (among 137 Countries) . . . . . . . . . . . . 29 Figure 41 Net Income of Main Infrastructure SOEs in 2017 After Operating Subsidies (TND Millions) . . . . 29 Figure 42 Vicious Cycle of Declining Utility Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 iv TUNISIA ECONOMIC MONITOR – THE COVID-19 GLOBAL PANDEMIC SHOCK List of Tables Table 1 Tunisia: A Consumption-Driven Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Table 2 Corporate Tax Rates Have Been Reformed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Table 3 Tunisia’s Main Export Partners Will Undergo a Severe Recession in 2020 . . . . . . . . . . . . . . . . . . .17 Table 4 Tunisia: Economic Growth Simulation Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 Table 5 Historical Spending on Infrastructure Using International Unit Costs . . . . . . . . . . . . . . . . . . . . . . . . 28 Table A.1 Tunisia: Selected Economic Indicators (2017–2023) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 Table A.2 Tunisia: Key Fiscal Indicators (2017–2023) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 List of Boxes Box 1 GoT’s Key Economic Support Schemes during the COVID-19 Outbreak . . . . . . . . . . . . . . . . . . . . 12 Box 2 Food and Energy Subsidy Schemes: Background and Pandemic Developments . . . . . . . . . . . . .14 Box 3 Anti-Money Laundering and Combating the Financing of Terrorism . . . . . . . . . . . . . . . . . . . . . . . . 16 TABLE OF CONTENTS v PREFACE T he Tunisia Economic Monitor provides an by Abdoulaye Sy, Majid Kazemi, Zied Ouelhazi update on key economic developments (Consultant) and Marwen Hikri. The Special Focus and policies. It examines these economic Section on Tunisia’s Infrastructure was written by developments and policies in a longer-term and global Rajesh Advani (Senior Water Supply and Sanitation context, and assesses their implications for the outlook Specialist) and Blanca Lopez-Alascio (Consultant) for the country. Its coverage has ranged from the macro- under the guidance of Carmen Nonay (Global economy to financial markets to indicators of human Practice Manager). Shireen Mahdi (Senior Economist) welfare and development. It is intended for a wide provided helpful comments. audience, including policy makers, business leaders, Muna Abed Salim (Senior Program Assistant) financial market participants, and the community of print-produced the report. The team is grateful to the analysts and professionals engaged on Tunisia. Government of Tunisia for its contributions to this The Tunisia Economic Monitor is a product of publication. the World Bank’s Global Practice for Macroeconomics, The findings, interpretations, and conclusions Trade and Investment team. This first issue was expressed in this Monitor are those of World Bank prepared by Majid Kazemi (Economist, Task Team staff and do not necessarily reflect the views of Leader), Abdoulaye Sy (Senior Economist), Natsuko the Executive Board of the World Bank or the Obayashi (Consultant) and Marwen Hkiri (Consultant) governments they represent. under the general guidance of Eric Le Borgne For questions and comments on the content (Global Practice Manager) and Jesko Hentschel of this publication, please contact Majid Kazemi (Regional Director). The Special Focus Chapter on (mkazemi@worldbank.org) or Eric Le Borgne the macroeconomic impact of COVID-19 in Tunisia (eleborgne@worldbank.org). documents a joint assessment with the Government (The data cut-off date for this report was June of Tunisia at the onset of the crisis and was prepared 25, 2020). vii EXECUTIVE SUMMARY T unisia’s real gross domestic product shock intensifying the country’s existing (GDP) growth in 2019 fell to the lowest rate macroeconomic imbalances and intensifying since 2011 due to low investment and a social pressures. In 2020Q1, GDP contracted by 1.7 volatile political environment. After growing by 2.7 percent (YoY) despite lockdowns starting at the end percent in 2018, GDP growth slowed to 1 percent in of the quarter. The weak growth in Q1 partly reflects 2019 primarily driven by consumption as investment the early global response which quickly reached the remained subdued due to an uncertain investment Tunisian economy through the external channels climate. Political uncertainties increased in 2019 (e.g., cancelled manufacturing orders and hotel following the death of President Essebsi, two rounds reservations). The contraction in economic activity in of elections, and a protracted government formation Q1 was broad-based as supply chains and distribution process which continued until February 2020. The networks were disrupted by the global lockdown. lack of political stability over the recent years has Only the agricultural sector grew (7.1 percent YoY) translated into underinvestment in both human and as the olive oil sector continued to operate following physical capital (on the latter see, the infrastructure record olive oil production. The containment diagnostic Special Focus chapter) putting Tunisia on measures severely impacted domestic economic a declining potential GDP path. On the supply side, activity in Apr-Jun. Following the lockdowns, strikes economic growth in 2019 was primarily driven by and sit-ins continued in plants and mines due to the the services sector, which grew by 1.8 percent. The economic impact of the containment measures and only sector witnessing marginally higher growth in previous economic grievances. These events have 2019 was non-tradable services. Agriculture growth led to disruptions in mining and oil extraction activity fell by almost 10 percentage points (pp) year-on- around the country. year (YoY) while the industries sector, including The fiscal deficit declined to 4.1 percent the manufacturing sector, also contracted. With job in 2019 following consolidation measures creation anemic and labor force participation stable but remains high considering the large public albeit at low levels, unemployment remained high debt burden and the economy’s vulnerability to (14.9 percent) in 2019 and considerably higher for shocks. Tunisia’s fiscal deficit rose from an average women, youth, graduates and in the interior regions of 1.8 percent of GDP before the revolution (2007– of the country. 2010) to 5.1 percent on average during the post- The COVID-19 outbreak hit the Tunisian revolution period (2011–2019). As a result, public economy through a double supply and demand debt has increased from 41 percent of GDP in 2010 ix to 72.6 percent in 2019. Fiscal consolidation attempts rate by 100 basis points in February 2019 to 7.75 started after the political transition in 2015 and percent. However, inflation accelerated after March included subsidy, civil service, and tax reforms but 2020 largely due to supply shocks from the COVID-19 produced mixed results. Thanks to tax reforms, tax pandemic forcing the monetary authorities to shift revenues have increased from 19.4 percent of GDP from monetary tightening to almost zero real interest on average before the revolution (2004–2010) to 25.4 rate. Despite the price increase, the BCT reduced percent in 2019. Since the beginning of the COVID-19 its policy rate by 100bps to 6.75 percent in March pandemic, the authorities have announced a range 2020, to support the economy. The authorities also of measures to support businesses and households announced a series of other measures in response to including support fund for small and medium-sized the crisis including deferral of loan repayments and enterprises (SMEs) and cash transfers for vulnerable a moratorium on fees for electronic payments and households as well as various other taxation and fee withdrawals. waivers. Tunisia’s economy is expected to enter a Slowing growth in major trading partners recession in 2020 (its deepest since the 1960s) weighed down on the external balances. The due to the impact of the COVID-19 pandemic. current account deficit declined to 8.8 percent of GDP Economic growth is projected to contract by 4 percent in 2019 from a record high 11.1 percent in 2018 as the in 2020 due to three months of social distancing and trade deficit improved slightly to 14 percent of GDP confinements (starting in the third week of March) due to lower imports and despite exports slowing. leading to a simultaneous demand and supply shock. Nonetheless, the decline on the overall balance The most affected sectors include export-oriented has put pressure on international reserves’ stocks, industries and services such as mechanical and pushing it down to less than three months of imports. electrical products, textile and tourism, as Tunisia’s The elevated current account deficit has increased major trade partners (France, Italy, Spain absorbing borrowing pressures especially from external sources 58 percent of exports) are among the hardest hit given high consumption and a decline in domestic countries by the pandemic. Other impacted sectors savings (the savings rate dropped by 8.7 percentage include transport and commerce. The economic points of GDP to 11.9 percent of GDP between 2011– contraction could be deeper in 2020 if the COVID-19 18 and 2006–10). Foreign direct investment in 2019 outbreak leads to a more protracted confinement with was equivalent to 2.2 percent of GDP and has yet cycles of confinement and deconfinement across the to fully recover to the previous peak of 3.4 percent year, both domestically and in trade partner countries. of GDP in 2010. Introduction of competitive foreign As production resumes many sectors may continue currency exchange auctions and purchases by the to be affected by potential disruptions of supply Central Bank of Tunisia (BCT) contributed to greater chains. GDP growth is projected to rebound in 2021 exchange rate flexibility led to the appreciation of the but will remain subdued in the following years due Dinar against the euro in 2019 after several years of to the longer term impact of the crisis. This report’s depreciation. The larger decline in imports relative to first Special Focus chapter provides key findings of a exports due to COVID-19 has led to a smaller current joint Government of Tunisia (GoT)/World Bank (WB) account deficit while the dinar depreciated in the first initial assessment of the macroeconomic impacts of five months of 2020. COVID-19 in Tunisia. Headline inflation declined in 2019 despite Government finances and Tunisia’s energy price reforms and higher food prices external sector will be significantly impacted but data for the first five months of 2020 show by the COVID-19 outbreak. The fiscal deficit is increasing inflationary pressures. Inflation eased expected to increase to 5 percent of GDP in 2020 as to 6.7 percent on average in 2019 thanks to tighter revenues decline and lower energy subsidies due to monetary policy in conjunction with monetary and the oil price decline are redirected to social transfers banking sector reforms. The BCT increased the policy and private sector support. The government will have x TUNISIA ECONOMIC MONITOR – THE COVID-19 GLOBAL PANDEMIC SHOCK limited fiscal space for economic and social support finances. Tunisia’s public debt vulnerabilities are as a strong decline in both tax and non-tax revenues partially mitigated by its low average interest rate (partly due to weak financial performance of state and long maturity. Lower global oil prices provide a owned enterprises; SOEs) is expected in 2020–2021. unique opportunity for the acceleration of reforms to On the external side, the current account deficit is strengthen safety nets and to reduce energy subsidies expected to decline as COVID-19 will lead to imports in a more sustained way. The sustainability of the contracting at a faster pace relative to exports in 2020 fiscal outlook hinges on a significant narrowing of the due to a reduction in imports of energy, consumption primary balance to lower the public debt-to-GDP ratio. and capital. The COVID-19 outbreak is expected Such reform measures are subject to political cohesion to severely impact services exports (tourism) and and determination to reform. The recent political remittances as the bulk of remittances originate uncertainties after the resignation of the government from the hardest hit countries in the EU region and in July 2020 highlights the most important challenge European tourists constitute a large share of visitors. facing the Tunisian economy to maintain political FDI inflows are expected to remain muted in the stability so as to implement long overdue structural medium-term. reforms. The deepening of the COVID-19 crisis could The main risks facing Tunisia’s economy heighten social frustrations and lead to social instability are related to a potential worsening of the as around 1.9 million Tunisians are estimated to be economic situation due to COVID-19 and political economically vulnerable (i.e., live below the US$ 5.5 uncertainties. The intensity and duration of the PPP line). Rising to the development challenges of COVID-19 global crisis will heavily impact Tunisia’s Tunisia requires all stakeholders to recognize the path to economic recovery. The fiscal deficit and perils of maintaining the current uncertain status quo government financing needs would further increase and come together at this critical juncture in Tunisia’s under a scenario of recurring confinements due to history. The recent GoT White Paper discusses resurgence of COVID-19 and continued depressed Tunisia’s key development challenges and provides global demand. Contingent liabilities of SOEs, especially a useful basis for national dialogue to transform the in affected sectors such as utilities and the transport looming socioeconomic crisis into a turning point for sector, could exacerbate pressures on government Tunisia’s future. Executive Summary xi ‫الملخص التنفیذي‬ ‫التونيس عرب القنوات الخارجية (فألغيت عىل سبيل املثال طلبات التصنيع‬ ‫تراجع منو الناتج املحيل الخام الحقيقي لتونس يف العام ‪ 2019‬إىل‬ ‫ة يف‬ ‫انكامش الحرك ِ‬ ‫ة االقتصاديّ ِ‬ ‫َ‬ ‫ن‬‫وحجوزات الفنادق)‪ .‬وتجدر اإلشارة إىل أ ّ‬ ‫أدىن معدالته منذ العام ‪ 2011‬نتيجة انخفاض االستثامرات وتقلّبات‬ ‫ول‪ ،‬اتّسم بكونه واسع النطاق فيام تعطّل سري سلسالت التوريد‬ ‫الربع األ ّ‬ ‫ع منو الناتج املحيل الخام بنسبة ‪ 2.7٪‬يف‬ ‫البيئة السياسية‪ .‬بعد أن ارتف َ‬ ‫العاملي‪ .‬وحده‬ ‫ّ‬ ‫وشبكات التوزيعِ بسبب اإلغالق املفروض عىل الصعيد‬ ‫ويكمن‬ ‫ُ‬ ‫العام ‪ ،2018‬عاد ليشهد تراجع بحيث بلغ ‪ 1٪‬يف العام ‪.2019‬‬ ‫ع الزراعي شهد منوا ً (بنسبة ‪ 7.1‬يف املائة عىل أساس سنوي فيام‬ ‫القطا ُ‬ ‫سبب الرتاجع هذا أساساً يف عملية االستهالك إذ إنّ االستثامرات ظلّت‬ ‫ُ‬ ‫جل‬‫ر قطاع إنتاج زيت الزيتون عىل املسار والنمط نفسهام بحيث س ّ‬ ‫استم ّ‬ ‫ر‪ .‬إضافة إىل ذلك‪ ،‬شهدت‬ ‫ً‬ ‫ضعيفة بسبب املناخ االستثامري غري املستق ّ‬ ‫رقامً انتاجياً قياسياً‪ .‬وقد خلّفت إجراءات االحتواء تأثريا ً عميقاً عىل النشاط‬ ‫البالد ازديادا ً يف التقلبات السياسية يف العام ‪ 2019‬إثر وفاة الرئيس‬ ‫يل من شهرأبريل حتى يونيو‪ .‬وتال عمليات اإلغالق تلك‪،‬‬ ‫االقتصادي املح ّ‬ ‫دت‬ ‫السبيس‪ ،‬وجولتني انتخابيّتني‪ ،‬وعملية تشكيل حكومة مطولة امت ّ‬ ‫ر اإلرضابات واالعتصامات يف املصانع واملناجم بسبب التداعيات‬ ‫استمرا ُ‬ ‫ر السيايس يف‬ ‫غياب االستقرا ِ‬ ‫ُ‬ ‫حتى فربايرمن العام ‪ .2020‬وقد ّ‬ ‫تجل‬ ‫االقتصادية الناتجة عن إجراءات االحتواء تلك واملظامل االقتصادية السابقة‬ ‫خالل السنوات األخرية بقصور استثامري يف كل من رأس املال البرشي‬ ‫ة إىل اضطرابات طالت‬ ‫التي عرفتها البالد‪ .‬وقد أدت هذه األحداث مجتمع ً‬ ‫فصل‬‫واملادي (ملعرفة املزيد حول االستثامر يف رأس املال املادي‪ ،‬راجعوا َ‬ ‫نشاطات التعدين واستخراج النفط يف أرجاء البالد كافةً‪.‬‬ ‫«تركيز خاص» املتمحور حول تشخيص البنية التحتية) ما أفىض إىل‬ ‫وضعِ تونس عىل مسار تدهور محتمل للناتج املحيل الخام ‪ .‬ويف ما‬ ‫اجع العجز املايل إىل ‪ 4.1٪‬يف العام ‪ 2019‬بعد تدابري الضبط املعتمدة‬ ‫تر َ‬ ‫رك‬ ‫ة النمو االقتصادي يف العام ‪ 2019‬تتح ّ‬ ‫ِ‬ ‫بالعرض فكانت عجل ُ‬ ‫يتعلّق‬ ‫مقارنة بعبء الدين العام الضخم وهشاشة‬ ‫َ‬ ‫عا نسبياً‬‫ً‬ ‫مرتف‬ ‫نه َ‬ ‫بقي‬ ‫لك ّ‬ ‫أساساً بفضل قطاع الخدمات الذي منا بنسبة ‪ .1.8٪‬أماّ القطاع الوحيد‬ ‫ع العجز املايل يف تونس من‬ ‫االقتصاد حيال الصدمات‪ .‬ففي الواقعِ ارتف َ‬ ‫وا أعىل نسبياً يف العام ‪ 2019‬فتمثّل بقطاع الخدمات غري‬ ‫الذي شهد من ً‬ ‫غ‬‫حواىل ‪ 1.8٪‬من الناتج املحيل الخام قبل الثورة (‪ )2010–2007‬ليبل َ‬ ‫القابلة للتداول‪ .‬والواقع أنّ منو الزراعة انخفض بنحو ‪ 10‬نقاط مئوية‬ ‫حواىل الـ ‪ 5.1٪‬يف خالل فرتة ما بعد الثورة (املمتدة من العام ‪2011‬‬ ‫عىل أساس سنوي‪ ،‬يف حني عاىن قطاع الصناعات‪ ،‬مبا فيه قطاع التصنيع‬ ‫حتى ‪ .)2019‬ونتيجة لذلك‪ ،‬ارتفع الدين العام من ‪ 41٪‬من إجاميل‬ ‫تراجعا‪ .‬وفيام شهدت البالد وهناً يف خلق فرص العمل واستقرارا ً يف‬ ‫الناتج املحيل يف العام ‪ 2010‬إىل ‪ 72.6٪‬يف العام ‪ .2019‬وقد بدأت‬ ‫مشاركة القوى العاملة بقي معدل البطالة مرتفعاً (‪ )% 14.9‬يف العام‬ ‫محاوالت الضبط املايل بعد عملية االنتقال السيايس الدميقراطي يف العام‬ ‫ريجني الحديثني‬ ‫‪ 2019‬وزادت نسبته خصوصاً بني النساء والشباب والخ ّ‬ ‫م املايل الحكومي‪ ،‬والخدمات املدنية‪ ،‬واإلصالحات‬ ‫‪ 2015‬فطالت الدع َ‬ ‫ويف املناطق الداخلية من البالد‪.‬‬ ‫نتائج مربكة وغري واضحة‪.‬‬ ‫َ‬ ‫عن‬ ‫نفسه‬ ‫الوقت‬ ‫يف‬ ‫أسفرت‬ ‫الرضيبية لك ّ‬ ‫نها‬ ‫دل‬ ‫وبفضل اإلصالحات الرضيبية‪ ،‬ارتفعت إيرادات الرضائب من مع ّ‬ ‫إن تفيش جائحة الكوفيد ‪ 19‬شكّل رضب ً‬ ‫ة لالقتصاد التونيس ذات ارتداد‬ ‫جلته قبل الثورة (أي بني العام ‪2010‬‬ ‫‪ 19.4٪‬من الناتج املحيل اإلجاميل س ّ‬ ‫والطلب عىل حدّ سواء وزاد من حجم االختالالت‬‫َ‬ ‫َ‬ ‫العرض‬ ‫مضاعف ه َّ‬ ‫ز‬ ‫ٍ‬ ‫و‪ )2014‬إىل ‪ 25.4٪‬يف العام ‪ .2019‬فمنذ ظهور جائحة الكوفيد ‪،19‬‬ ‫الحالية يف االقتصاد الكيل ومن حدة الضغوطات االجتامعية‪ .‬ففي الربع‬ ‫أعلنت السلطات التونسية عن مجموعة من اإلجراءات ات ّخذتها لتدع َ‬ ‫م‬ ‫ول من العام ‪ ،2020‬تراجع الناتج املحيل الخام بنسبة ‪ 1.7‬يف املئة‬ ‫األ ّ‬ ‫دمت متويالت لدعم املؤسسات الصغرىواملتوسطة‬ ‫الرشكات واألرس‪ ،‬فق ّ‬ ‫(عىل أساس سنوي) رغم إجراءات اإلغالق التام التي اعتمدت يف نهاية‬ ‫والتحويالت النقدية لألرس األكرث فقرا ً باإلضافة إىل إقرار إعفاءات أخرى‬ ‫الفصل نفسه‪ .‬ويعكس هذا النمو الضعيف جزئ ً‬ ‫يا يف الربع األول من‬ ‫من الرضائب والرسوم‪.‬‬ ‫ة التي رسعان ما بلغت تبعاتها االقتصاد‬ ‫السنة االستجاب َ‬ ‫ة العاملية املبكر َ‬ ‫‪xiii‬‬ ‫يكتيس االنكامش االقتصادي طابعاً أعمق يف العام ‪ 2020‬إذا ما أفىض‬ ‫ألقى تباطؤ منو الرشكاء التجاريني الرئيسني بثقله عىل امليزانيات الخارجية‪.‬‬ ‫ددا تتبيع دورات من الحجر‬ ‫ر جائحة الكوفيد ‪ 19‬إىل حجر أكرث تش ّ‬ ‫انتشا ُ‬ ‫ز الحساب الجاري إىل ‪ % 8.8‬من الناتج املحيل الخام يف العام‬ ‫انخفض عج ُ‬ ‫ورفع الحجر املتعاقبة عىل مدار العام‪ ،‬محلياً ويف الدول الرشيكة لها يف‬ ‫د عجز‬ ‫‪ 2019‬من مستوى قيايس بلغ ‪ % 11.1‬يف العام ‪ ،2018‬يف وقت شه َ‬ ‫التجارة‪ .‬وفيام ت ُستأنف عمليات اإلنتاج‪ ،‬قد تبقى قطاعات كثرية متأثرة‬ ‫ليالمس ‪ % 14‬من الناتج املحليالخامنتيجة‬ ‫َ‬ ‫امليزان التجاري تحسناً طفيفاً‬ ‫باالضطرابات واالنقطاعات املحتملة يف سلسالت التوريد‪ .‬ومن املتوقع‬ ‫ع امليزاني ِ‬ ‫ة‬ ‫ُ‬ ‫اج‬ ‫ر‬ ‫ت‬ ‫د‬ ‫ّى‬ ‫أ‬ ‫فقد‬ ‫ذلك‪،‬‬ ‫ومع‬ ‫ات‪.‬‬‫ر‬ ‫الصاد‬ ‫تراجعِ الواردات رغم تباطؤ‬ ‫ينتعش منو الناتج املحيل الخام يف العام ‪ ،2021‬لكنه سيظل مقيّدا ً‬‫َ‬ ‫أن‬ ‫العامة إىل الضغط عىل االحتياطيات الدولية‪ ،‬مفضياً بها إىل أقل من ثالثة‬ ‫راء ما تخلّفه األزمة من تأثري طويل املدى‪ُ .‬‬ ‫يعرض‬ ‫ّ‬ ‫ج‬ ‫التالية‬ ‫السنوات‬ ‫يف‬ ‫ما ارتفاع عجز الحساب الجاري فأدّى من جهته إىل‬ ‫أشهر من الواردات‪ .‬أ ّ‬ ‫الفصل األول «تركيز خاص» النتائج الرئيسة املتأتية عن تقييم أويل قامت‬ ‫را إىل ارتفاع‬ ‫زيادة ضغوط االقرتاض خصوصاً من املصادر الخارجية نظ ً‬ ‫به حكومة تونس بالتعاون مع البنك الدويل وتناولت فيه تأثريات جائحة‬ ‫دخرات املحلية لدى التونسيني (فقد انخفض‬ ‫نسبة االستهالك وانخفاض امل ّ‬ ‫الكوفيد ‪ 19‬عىل االقتصاد الكيل يف تونس‪.‬‬ ‫معدل االدخار بنسبة ‪ 8.7‬نقطة مئوية من الناتج املحيل الخام إىل ‪11.9‬‬ ‫‪ %‬الناتج املحيل الخام بني العام ‪ 2011‬و‪ 2018‬واألعوام ‪.)2010–2006‬‬ ‫ستتأثّر مالية الحكومة والقطاع الخارجي يف تونس بشكل كبري بتفيش‬ ‫وكان االستثامر األجنبي املبارش يف العام ‪ 2019‬يعادل ‪ % 2.2‬من الناتج‬ ‫الكوفيد ‪ .19‬من املتوقّع أن يرتفع عجز املالية العامة إىل ‪ 5٪‬من إجاميل‬ ‫املحيل الخام ومل يبلغ ذروة االنتعاش السابقة املعادلة لـ ‪ % 3.4‬الناتج‬ ‫الناتج املحيل يف العام ‪ 2020‬فيام أعيد توجيه انخفاض اإليرادات‬ ‫ني رصف العمالت‬ ‫املحيل الخام يف العام ‪ .2010‬وأسهمت عملية تب ّ‬ ‫وانخفاض دعم الطاقة بسبب تراجع أسعار النفط‪ ،‬إىل دعم التحويالت‬ ‫األجنبية وبيعها ورشائها من قبل البنك املركزي التونيس يف تعزيز مرونة‬ ‫د‬‫يل محدو ٍ‬ ‫ن الحكومة ستحظى مبجا ٍ‬ ‫ل ما ّ‬ ‫االجتامعية والقطاع الخاص‪ .‬إال أ ّ‬ ‫سعر الرصف‪ ،‬وأدّت بالتايل إىل ارتفاع سعر رصف الدينار مقابل اليورو يف‬ ‫مخصص للدعم االقتصادي واالجتامعي إذ يُتوقّع حدوث انخفاض حا ّ‬ ‫د‬ ‫ن‬‫ة من الرتاجع والتدهور‪ .‬إ ّ‬ ‫دَ‬ ‫ٍ‬ ‫سنوات ع ّ‬ ‫العام ‪ 2019‬بعدما عاىن هذا السعر‬ ‫يا بسبب األداء املايل الضعيف‬ ‫يف اإليرادات الرضيبية وغري الرضيبية (جزئ ً‬ ‫دل الصادرات نتيجة جائحة‬ ‫دل الواردات مقارنة مبع ّ‬ ‫االنخفاض األكرب يف مع ّ‬ ‫ما يف ما يتعلّق‬‫للمؤسسات اململوكة للدولة؛ ‪ )SOEs‬يف ‪ .2021–2020‬أ ّ‬ ‫ز أصغر يف الحساب الجاري بينام انخفضت قيمة‬ ‫الكوفيد ‪ 19‬أدّى إىل عج ٍ‬ ‫بالقطاع الخارجي فيتوقّع انخفاض يف عجز الحساب الجاري فيام سيفيض‬ ‫الدينار يف األشهر الخمسة األوىل من العام ‪.2020‬‬ ‫انتشار فريوس الكوفيد ‪ 19‬إىل تقليص يف الواردات بوترية أرسع مقارنة‬ ‫بالصادرات يف العام ‪ 2020‬نتيجة تراجعٍ يف واردات الطاقة ويف االستهالك‬ ‫انخفض معدل التضخم املؤقت يف العام ‪ 2019‬عىل الرغم من التعديل يف‬ ‫ّف تفيش فريوس الكوفيد ‪ 19‬تبعات كارثية‬ ‫ويف رأس املال‪ .‬ويُتوقّ ُ‬ ‫ع أن يخل َ‬ ‫ن بيانات األشهر الخمسة‬ ‫سعر الطاقة وارتفاع أسعار املواد الغذائية‪ ،‬لك ّ‬ ‫عىل تصدير الخدمات (السياحة) والتحويالت‪ ،‬حيث يأيت الجزء األكرب من‬ ‫األوىل من العام ‪ 2020‬تظهر ضغوطات تضخمية متزايدة‪ .‬ففي العام‬ ‫را يف منطقة االتحاد األورويب ويشكّل‬ ‫التحويالت من البلدان األكرث ت ّ‬ ‫رض ً‬ ‫ر عىل حواىل الـ ‪ 6.7%‬نتيجة سياسة‬ ‫دة التضخم لتستق ّ‬ ‫‪ ،2019‬خفّت ح ّ‬ ‫السياح األوروبيون الرشيحة الكربى من زائري البالد‪ .‬ومن املتوقع أن‬ ‫ة تتزامن مع إصالحات يف القطاعني النقدي واملرصيف‪ .‬فقد‬ ‫نقدية مشدد ٍ‬ ‫ة عىل املدى املتوسط‪.‬‬ ‫تظل تدفقات االستثامر األجنبي املبارش الوافدة قليل ً‬ ‫ّ‬ ‫دل السياسة املعتمدة مبقدار ‪ 100‬نقطة‬ ‫رفع البنك املركزي التونيس مع ّ‬ ‫ن نسبة التضخّم‬ ‫أساسية يف فرباير من العام ‪ 2019‬إىل ‪ .% 7.75‬إال أ ّ‬ ‫ترتبط املخاطر األساسية التي تواجه االقتصاد التونيس بالتدهور‬ ‫رضت لها عمليات‬ ‫تزايدت بعد مارس ‪ 2020‬نتيجة الصدمات التي تع ّ‬ ‫االقتصادي املحتمل الناتج عن الكوفيد ‪ 19‬وغياب االستقرار السيايس‪.‬‬ ‫ة عىل‬ ‫ِ‬ ‫السلطات املالي َ‬ ‫العرض بسبب جائحة الكوفيد ‪ 19‬التي أرغمت‬ ‫ِ‬ ‫دتها بشكل كبري عىل‬ ‫ففي الواقع‪ ،‬ستؤثر شدة هذه األزمة العاملية وم ّ‬ ‫دد النقدي إىل سياسة معدل الفائدة الفع ّ‬ ‫يل‬ ‫االنتقال من سياسة التش ّ‬ ‫مسار تونس نحو االنتعاش االقتصادي‪ .‬وسيزداد العجز املايل واالحتياجات‬ ‫املنعدم‪ .‬وعىل الرغم من ارتفاع األسعار‪ ،‬خفض البنك املركزي التونيس‬ ‫التمويلية الحكومية بشكل هائل يف ظل سيناريو الحجر املتكرر املتأيت عن‬ ‫معدل سياسته مبقدار ‪ 100‬نقطة أساس إىل ‪ % 6.75‬يف مارس ‪ ،2020‬يك‬ ‫ظهور الكوفيد ‪ 19‬من جديد وعن استمرار الرتاجع يف الطلب عىل الصعيد‬ ‫يدعم اقتصاد البالد‪ .‬ويف اإلطار نفسه أعلنت السلطات عن اتخاذ سلسلة‬ ‫العاملي‪ .‬فقد تؤدي الخصوم الطارئة يف الرشكات اململوكة من قبل الدولة‪،‬‬ ‫من اإلجراءات األخرى مبثابة استجابة حيال األزمة مبا يف ذلك تأجيل سداد‬ ‫خصوصاً يف القطاعات املترضرة مثل املرافق والنقل‪ ،‬إىل تفاقم الضغوطات‬ ‫القروض ووقف الرسوم عىل املدفوعات والسحوبات اإللكرتونية‪.‬‬ ‫م التخفيف بشكل جزيئ من مخاطر الدين العام‬ ‫عىل مالية الحكومة‪ .‬وت ّ‬ ‫يف تونس من خالل خفض معدل سعر الفائدة ومتديد فرتة االستحقاق‪.‬‬ ‫من املتوقع أن يدخل االقتصاد التونيس مرحلة ركود يف العام ‪( 2020‬تكون‬ ‫ة من‬ ‫ة فريد ً‬‫ّل انخفاض أسعار النفط عىل الصعيد العاملي فرص ً‬ ‫ويشك ُ‬ ‫األضخم منذ ستينيات القرن العرشين) بسبب تأثري جائحة الكوفيد ‪.19‬‬ ‫شأنها ترسيع اإلصالحات بغية تعزيز شبكات األمان وخفض دعم الطاقة‬ ‫من املتوقع أن ينكمش النمو االقتصادي بنسبة ‪ 4%‬يف العام ‪ 2020‬بسبب‬ ‫بطريقة أكرث استدامة‪ .‬تتوقّف استدامة التوقعات املالية عىل تضييق كبري‬ ‫ثالثة أشهر من التباعد االجتامعي والحجر (التي بدأت يف األسبوع الثالث‬ ‫يف الرصيد األويل لخفض نسبة الدين العام إىل الناتج املحيل اإلجاميل‪.‬‬ ‫من مارس) مام سيؤدي إىل حدوث صدمة متتالية يف العرض والطلب‪.‬‬ ‫وترتهن استدامة التوقعات املالية بتضييق كبري يف امليزانية األوىل بغية‬ ‫را من هذه املوجة‪ ،‬الصناعات والخدمات‬ ‫م القطاعات األكرث ترض ً‬‫وتض ُّ‬ ‫ع هذه التدابري‬ ‫خفض معدل الدين العام إىل الناتج املحيل الخام‪ .‬وتخض ُ‬ ‫جهة للتصدير شأن املنتجات امليكانيكية والكهربائية‪ ،‬واملنسوجات‬ ‫املو ّ‬ ‫اإلصالحية للتامسك السيايس والتصميم الفعيل عىل اإلصالح‪ .‬كام تسلط‬ ‫ن رشكاء تونس التجاريني األساسيّني (تستورد فرنسا‬ ‫والسياحة‪ ،‬ذلك أ ّ‬ ‫الشكوك السياسية الحالية التي نشأت بعد استقالة الحكومة يف يوليو‬ ‫وإيطاليا وإسبانيا ‪ % 58‬من الصادرات) يندرجون ضمن البلدان األكرث‬ ‫دى لالقتصاد التونيس والذي‬ ‫‪ 2020‬الضوء عىل التحدي األكرب الذي يتص ّ‬ ‫را من الوباء‪ .‬وتشمل القطاعات املتأثرة األخرى النقل والتجارة‪ .‬وقد‬ ‫ترض ً‬ ‫‪xiv‬‬ ‫‪TUNISIA ECONOMIC MONITOR – THE COVID-19 GLOBAL PANDEMIC SHOCK‬‬ ‫يني أن يعوا املخاطر املرتتبة عىل الحفاظ عىل الوضع الراهن‬ ‫من كل املعن ّ‬ ‫يتمثّل بالحفاظ عىل االستقرار السيايس بهدف تنفيذ إصالحات هيكلية‬ ‫ر وأن يتعاونوا يدا ً بيد يف هذا الوقت الحرج من تاريخ تونس‪.‬‬ ‫غري املستق ّ‬ ‫ن تفاقم أزمة فريوس كورونا قد يؤدي‬‫طال انتظارها‪ .‬وتجدر اإلشارة إىل أ ّ‬ ‫ويناقش مخطط «الكتاب األبيض” الذي أصدرته الحكومة تونس مؤخرا ً‬ ‫إىل زيادة اإلحباط االجتامعي من جهة وانعدام االستقرار االجتامعي من‬ ‫ّل أساساً مفيدا ً للحوار‬ ‫التحديات األساسية للبالد يف مجال التنمية‪ ،‬ويشك ُ‬ ‫نف حواىل ‪ 1.9‬مليون تونيس عىل أنّهم يعانون هشاشة‬ ‫جهة أخرى إذ يُص ّ‬ ‫الوطني بحيث يجعل األزمة االقتصادية االجتامعية التي تلوح يف األفق‬ ‫اقتصادية (أي يعيشون تحت خط الفقر بحيث ّ‬ ‫تقل قدرتهم الرشائية عن‬ ‫ول حاسمة يف مستقبلِ تونس‪.‬‬ ‫نقط َ‬ ‫ة تح ّ‬ ‫‪ 5.5‬دوالر أمرييك)‪ .‬من هنا‪ ،‬يتطلّب التصدي لتحديات التنمية يف تونس‬ ‫امللخص التنفيذي‬ ‫‪xv‬‬ RÉSUMÉ EXÉCUTIF E n 2019, la croissance du produit intérieur au marché du travail stable, quoiqu’à des niveaux brut (PIB) réel de la Tunisie est tombée faibles, le chômage est resté élevé (14,9 %) en 2019 à son taux le plus bas depuis 2011 en et s’est établi à un niveau considérablement plus raison de la faiblesse des investissements et de élevé pour les femmes, les jeunes, les diplômés et l’instabilité de l’environnement politique. Après dans les régions de l’intérieur du pays. une augmentation de 2,7 % en 2018, la croissance du L’épidémie de COVID-19 a frappé l’éco- PIB a ralenti à 1 % en 2019, principalement sous l’effet nomie tunisienne à travers un double choc de de la consommation, l’investissement restant modéré l’offre et de la demande qui a intensifié les désé- en raison d’un climat d’investissement incertain. Les quilibres macroéconomiques existants du pays incertitudes politiques se sont accrues en 2019 à la et les pressions sociales. Au premier trimestre de suite du décès du président Essebsi, des deux tours 2020, le PIB s’est contracté de 1,7 % (en glissement des élections et d’un long processus de formation annuel) en dépit du confinement mis en place à partir du gouvernement qui s’est poursuivi jusqu’en février de la fin du trimestre. La faible croissance au premier 2020. L’instabilité politique au cours des dernières trimestre reflète en partie la réaction rapide à l’échelle années s’est traduite par un sous-investissement mondiale qui a très vite atteint l’économie tunisienne dans le capital humain et physique (concernant ce par les canaux externes (par exemple, annulation de dernier, voir le chapitre « Attention particulière au commandes manufacturières et de réservations d’hô- diagnostic des infrastructures »), plaçant la Tunisie tels). La contraction de l’activité économique au pre- sur une trajectoire de baisse potentielle du PIB. Du mier trimestre a été généralisée, les chaînes d’appro- côté de l’offre, la croissance économique en 2019 a visionnement et les réseaux de distribution ayant été été principalement tirée par le secteur des services, perturbés par le confinement mondial. Seul le secteur dont la croissance s’est établie à 1,8 %. Le secteur agricole a connu une croissance (7,1 % en glisse- des services non marchands est le seul à avoir connu ment annuel), le secteur de l’huile d’olive continuant une croissance légèrement plus élevée en 2019. La de fonctionner après une production record. Les me- croissance du secteur agricole a diminué de près sures de confinement ont gravement affecté l’activi- de 10 points de pourcentage (pp) en glissement té économique intérieure en avril-juin. À la suite des annuel et le secteur des industries, dont le secteur confinements, les grèves et les occupations se sont manufacturier, s’est également contracté. Avec une poursuivies dans les usines et les mines en raison de création d’emplois anémique et une participation l’impact économique de ces mesures conjugué aux xvii précédents griefs économiques. Ces événements se plus haut niveau de 3,4 % du PIB en 2010. La mise sont traduits par des perturbations des activités mi- en place d’adjudications de devises compétitives et nières et d’extraction de pétrole dans tout le pays. les achats par la Banque centrale de Tunisie (BCT) Le déficit budgétaire est tombé à 4,1 % en ont contribué à une plus grande flexibilité du taux de 2019 à la suite de mesures d’assainissement, change, ce qui a conduit à l’appréciation du dinar mais reste élevé compte tenu de l’important far- par rapport à l’euro en 2019 après plusieurs années deau de la dette publique et de la vulnérabilité de dépréciation. La baisse plus importante des de l’économie aux chocs. Le déficit budgétaire de importations par rapport aux exportations, due à la la Tunisie est passé d’une moyenne de 1,8 % du PIB COVID-19, a entraîné un déficit du compte courant avant la révolution (2007–2010) à 5,1 % en moyenne plus faible, tandis que le dinar se dépréciait au cours pendant la période post-révolution (2011–2019). En des cinq premiers mois de 2020. conséquence, la dette publique est passée de 41 % L’inflation globale a diminué en 2019 mal- du PIB en 2010 à 72,6 % en 2019. Les tentatives d’as- gré les réformes des prix de l’énergie et la hausse sainissement budgétaire ont commencé après la tran- des prix alimentaires, mais les données pour les sition politique en 2015, intégrant des réformes des cinq premiers mois de 2020 montrent des pres- subventions, de la fonction publique et de la fiscali- sions inflationnistes croissantes. L’inflation est té. Toutefois, elles ont produit des résultats mitigés. tombée à 6,7 % en moyenne en 2019 grâce à une Grâce aux réformes fiscales, les recettes fiscales ont politique monétaire plus stricte associée à des ré- augmenté pour s’établir de 19,4 % du PIB en moyenne formes des secteurs monétaire et bancaire. La BCT avant la révolution (2004–2010) à 25,4 % en 2019. a augmenté le taux directeur de 100 points de base Depuis le début de la pandémie de COVID-19, les au- en février 2019 pour l’établir à 7,75 %. Cependant, torités ont annoncé une série de mesures pour soute- l’inflation s’est accélérée après mars 2020, en grande nir les entreprises et les ménages, y compris un fonds partie en raison des chocs de l’offre dues à la pan- de soutien aux petites et moyennes entreprises (PME), démie de COVID 19, contraignant les autorités mo- des transferts monétaires destinés aux ménages vul- nétaires à passer d’un resserrement monétaire à un nérables ainsi que plusieurs exonérations fiscales et taux d’intérêt réel presque nul. Malgré l’augmentation dispenses de frais. des prix, la BCT a réduit son taux directeur de 100 Le ralentissement de la croissance des points de base à 6,75 % en mars 2020, pour soute- principaux partenaires commerciaux a pesé sur nir l’économie. Les autorités ont également annoncé les soldes extérieurs. Le déficit du compte courant une série de nouvelles mesures en réponse à la crise, est tombé à 8,8 % du PIB en 2019, contre 11,1 % en notamment le report des remboursements de prêt et 2018, alors que le déficit commercial s’est légèrement un moratoire sur les frais de paiement et de retrait amélioré pour atteindre 14 % du PIB grâce à la baisse électroniques. des importations et malgré le ralentissement des L’économie tunisienne devrait entrer dans exportations. Néanmoins, le déclin du solde global une récession en 2020 (la plus profonde depuis a exercé une pression sur les stocks de réserves les années 1960) en raison de l’impact de la internationales, les ramenant à moins de trois mois pandémie de COVID-19. À cause des trois mois d’importations. Le déficit élevé du compte courant a de distanciation sociale et de confinement (mis en accru les pressions sur les emprunts, en particulier place à partir de la troisième semaine de mars), la auprès de sources extérieures, compte tenu de la croissance économique devrait se contracter de 4 % en forte consommation et de la baisse de l’épargne 2020, entraînant un choc simultané de l’offre et de la intérieure (le taux d’épargne a chuté de 8,7 points de demande. Les industries et les services d’exportation, pourcentage du PIB pour s’établir à 11,9 % du PIB sur tels que les produits mécaniques et électriques, le les périodes 2011–2018 et 2006–2010). En 2019, textile et le tourisme sont les secteurs les plus touchés, les investissements directs étrangers équivalaient à les principaux partenaires commerciaux de la Tunisie 2,2 % du PIB, mais n’étaient pas encore revenus à leur (la France, l’Italie et l’Espagne absorbant 58 % des xviii TUNISIA ECONOMIC MONITOR – THE COVID-19 GLOBAL PANDEMIC SHOCK exportations) figurant parmi les pays les plus durement Les principaux risques auxquels l’économie affectés par la pandémie. Les transports et le commerce tunisienne est confrontée sont liés à une éven- comptent également parmi les secteurs impactés. La tuelle aggravation de la situation économique contraction économique pourrait être plus importante due au COVID-19 et aux incertitudes politiques. en 2020 si l’épidémie de COVID-19 devait entraîner L’intensité et la durée de la crise mondiale de la un confinement plus durable ponctué par des cycles COVID-19 auront un impact considérable sur la trajec- de confinement et de déconfinement tout au long de toire de la reprise économique de la Tunisie. Dans un l’année, à la fois au niveau national et dans les pays scénario de confinements récurrents, le déficit bud- partenaires commerciaux. À mesure que la production gétaire et les besoins de financement des pouvoirs reprendra, de nombreux secteurs pourraient continuer publics augmenteraient encore en raison de la résur- d’être affectés par des perturbations potentielles gence du COVID-19 et de la baisse continue de la de- des chaînes d’approvisionnement. La croissance du mande mondiale. Les engagements conditionnels des PIB devrait rebondir en 2021, mais restera modérée entreprises publiques, en particulier dans les secteurs les années suivantes en raison de l’impact à plus touchés comme les services publics et le secteur des long terme de la crise. Le premier chapitre de ce transports, pourraient exacerber les pressions sur les rapport, «  Attention particulière au diagnostic des finances publiques. Les vulnérabilités de la dette pu- infrastructures  », présente les principales conclusions blique de la Tunisie sont en partie atténuées par son de l’évaluation initiale des impacts macroéconomiques faible taux d’intérêt moyen et sa longue échéance. La de la COVID-19 en Tunisie réalisée conjointement baisse des prix mondiaux du pétrole offre une occa- par le gouvernement de Tunisie (GdT) et la Banque sion unique d’accélérer les réformes visant à renfor- mondiale (BM). cer les filets de sécurité et à réduire les subventions Les finances publiques et le secteur exté- à l’énergie de manière plus durable. La soutenabilité rieur tunisien seront considérablement affectés des perspectives budgétaires repose sur le resserre- par l’épidémie de COVID-19. Le déficit budgétaire ment significatif du solde primaire pour abaisser le ra- devrait augmenter pour atteindre 5 % du PIB en 2020 tio de la dette publique rapportée au PIB. Ces mesures à mesure que les recettes diminuent et que la baisse de réforme sont soumises à la cohésion politique et à des subventions à l’énergie provoquée par la baisse la volonté de réforme. Les récentes incertitudes poli- des prix du pétrole est réorientée vers les transferts tiques après la démission du gouvernement en juillet sociaux et le soutien au secteur privé. Le gouverne- 2020 mettent en évidence le défi le plus important au- ment disposera d’un espace budgétaire restreint pour quel est confrontée l’économie tunisienne pour main- les mesures de soutien économique et social, car une tenir la stabilité politique afin de mettre en œuvre des forte baisse des recettes fiscales et non fiscales (en réformes structurelles attendues depuis longtemps. partie en raison de la faible performance financière des L’aggravation de la crise COVID-19 pourrait exacerber entreprises publiques) est attendue en 2020–2021. les frustrations sociales et entraîner une instabilité so- Du côté extérieur, le déficit du compte courant devrait ciale car selon les estimations, 1,9 million de Tunisiens se réduire car la COVID-19 entraînera une contraction sont économiquement vulnérables (c’est-à-dire qu’ils des importations à un rythme plus rapide que celui des vivent sous le seuil de 5,5 USD en PPP). Pour relever exportations en 2020 en raison d’une réduction des les défis du développement de la Tunisie, l’ensemble importations d’énergie, de la consommation et du ca- des parties concernées doit reconnaître les dangers pital. L’épidémie de COVID-19 devrait avoir un impact d’un maintien de l’actuel statu quo incertain et unir important sur les exportations de services (tourisme) et leurs forces à ce moment critique de l’histoire de la les envois de fonds, la majeure partie de ces envois Tunisie. Le récent Livre blanc du GdT examine les provenant des pays de l’UE les plus durement touchés principaux défis du développement de la Tunisie et et les Européens constituant une part importante des constitue une base utile pour un dialogue national touristes. Les flux entrants d’IDE devraient rester modé- visant à transformer la crise socioéconomique im- rés à moyen terme. minente en un tournant pour l’avenir de la Tunisie. Résumé Exécutif xix 1 RECENT ECONOMIC AND POLICY DEVELOPMENTS Real Sector and Employment thanks to improved security after the terrorist attacks of 2015. The Tunisian services sector accounted for Tunisia’s economic growth slowed in 2019 60 percent of GDP in 2019, while 42 percent of GDP in a backdrop of low investment, a legacy of consists of tradable services (Figure 2). The other previous years’ political uncertainty and security main contributor to growth was public administration challenges. Tunisia’s Gross Domestic Product services which over the last decade has seen its (GDP) growth decelerated to 1 percent in 2019, share in GDP jump from 0.1 percent to 18 percent in the slowest rate since 2011, following a number 2019 due to a growing wage bill since the revolution. of major political events in the year (the death of The agriculture sector growth sharply declined by President Essebsi and the holding of presidential and parliamentary elections). Growth was mainly driven by consumption, while investment and exports GDP Growth Has Slowed to its Lowest FIGURE 1 •  were significantly below their pre-revolution levels Rate in Recent Years as a share of GDP. As a result of a lengthy political 4 Contribution (pp) and growth (%) transition and political instability in the recent years, key economic reforms have been delayed, and 2 investment both from private and public sources have remained muted. For example, investment has 0 dropped from 26.4 percent of GDP in 2010 to 19.2 percent in 2019. –2 On the supply side, economic growth in 2016 2017 2018 2019 2019 was primarily driven by the services sector Non–tradable services Tradable services (Figure 1). Tradable service grew by 2.2 percent Non–manufacturing industries Manufacturing industries Agriculture GDP growth in 2019, led by the tourism sector (6.8 percent), following the sector’s recovery in 2017 and 2018 Source: National Institute of Statistics (INS) and World Bank staff calculations. 1 Growth in 2019 Was Driven by FIGURE 2 •  Key Manufacturing Sector Activity FIGURE 3 •  Services (Textiles and Mechanic & Electric) Slowed in 2019… 45 40 12 TND billion, constant 35 TND billion, constant 10 2010 prices 30 2010 prices 25 8 20 6 15 4 10 5 2 0 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Commerce Hotels and restaurants Agro–food Textile Transports Post & telecommunication Others Petroleum refinery Financial services Other tradable services Chemical Construction and craft materials Non–tradable services Mechanic and electric Source: INS. Source: INS. 10.5 percentage points (pp) due to a lower olive oil 2018 respectively, mainly due to the natural declining production of the previous season which was offset trend of petrol and gas resources. Tunisian refineries by a good cereal season. experienced production disruptions due to protest Industrial production declined by 1 percent between February and November which led to their in 2019 as growth in Europe (the destination output contracting by 62.8 percent in 2019. Fewer of more than 75 percent of Tunisia’s exports) strikes and social protests since the revolution, slowed. Manufacturing production (accounting for 15 attracted investments notably in exploration, which percent of GDP) contracted by 0.7 percent in 2019 as grew from TND72 million in 2018 to TND254 million a slower growth in major trade partners eased. The in 2019. New projects including the new Nawara gas sector had previously grown by 1.1 percent in 2018. field (operationalize in February 2020) could help The textile sector, and the mechanic and electric counter the natural decline in gas production. In sector, both key manufacturing exporting sectors, mining, phosphate production grew by 46 percent to contracted by 3 percent and 1.5 percent, respectively reach 4 million tons for the first time since 2011. The (Figure 3). Tunisia’s mechanic and electric industry has undergone a rapid growth period over the last years. The sector saw its production share almost double from 5.2 percent of GDP in 2009 to 11.1 percent in …and Petroleum Extraction Declined FIGURE 4 •  2019 due to government policies of promoting higher to Close to Less than Half of its 2010 Level value-added specialization, which partly compensated the loss of the global market share in textile since the 8 7 TND billion, constant end of multifiber agreement in 2005. 6 2010 prices 5 Non-manufacturing industries contracted 4 by 1.8 percent in 2019 due to refinery production 3 2 disruptions and the natural decline in energy 1 0 extraction. The declining petroleum and gas 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 resources continued in 2019 with a contraction of 8.1 percent (Figure 4). Tunisia’s crude oil production Construction Water peaked in 1980 and the country has been a net Electricity and gas Mining (phosphate) Petroleum and gas extraction importer since 2000. Crude oil production dropped by 15.6 percent and by 0.4 percent in 2017 and Source: INS. 2 TUNISIA ECONOMIC MONITOR – THE COVID-19 GLOBAL PANDEMIC SHOCK Tradable Services and Industries FIGURE 5 •  Potential GDP Growth Has Steadily FIGURE 6 •  Were the Main Contributors to the Declined Over the Last Two Decades 2020Q1 Contraction 8 1.5 8 7 6 Constribution to GDP 1.0 6 YoY Growth (%) 4 5 growth (pp) 0.5 2 4 0.0 0 3 % –0.5 –2 2 –4 1 –1.0 –6 0 –1.5 –8 –1 Agriculture Manufacturing Non–Manu. industries Tradable services Non–tradable services GDP –2 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Actual Growth Potential GDP Growth Contribution (LHS) Growth (YoY) (RHS) Source: World Bank staff calculations. Source: INS and World Bank staff calculations. Note: Potential growth is estimated as a function of changes in capital stock, labor Note: GDP in 2010 constant prices series. force, and TFP (Solow decomposition). sector’s production was strongly affected by social (YoY) during the first five months of 2020. In May protests since the revolution.1 alone, exports were 37.1 percent lower (YoY) which The COVID-19 global downturn impacted followed a 48.9 percent contraction in April. Textile the Tunisian economy even before lockdowns and mechanic and electric sectors are Tunisia’s key were enforced domestically.2 In 2020Q1, GDP manufacturing exports, around half of which operate contracted by 1.4 percent year-on-year (YoY) with foreign capital and are highly sensitive to the (Figure 5) despite the fact that the government global economic developments. Based on Industry announced lockdowns in the end of the quarter and Innovation Promotion Agency (APPI) data for the (March 20). The country’s high trade openness (one first four months of 2020, investment plans dropped of the highest in MENA) especially for services meant by 32.8 percent (YoY) for exporting companies that supply and demand shocks in major trading which were hard hit by the lockdown but grew for partners reverberated in Tunisia’s economy early on. other companies by 12.8 percent. The most affected GDP growth in 2020Q1 (the beginning of the tourism season) was driven by tradable services’ contraction 1 Tunisia ranked as the world’s 10th largest phosphate of 4.3 percent (YoY) following sharp declines in producer in 2019 but previously, in 2009, was the hotels and restaurants and transport. Manufacturing world’s fifth largest producer. Phosphate is mainly production contracted by 1.6 percent (YoY) as produced in the remote poor region of Gafsa where global supply chains and distribution networks the unemployment rate is one of the highest among started witnessing disruptions.3 Non-manufacturing the country’s governorates (25.5 percent in 2019). As a industries also contracted sharply (-4.4 percent) due result of recurrent social protests and strikes since the revolution, production has been frequently disrupted, to a drop in energy and construction production and and Tunisia has since lost its international market share despite mining sector (phosphate) growing by 19.8 (such as the Indian market). percent (YoY). However, agricultural production grew 2 At the beginning of the lockdown, a survey showed that by 7.1 percent with many olive oil factories continuing 60 percent of companies have their orders cancelled to operate following record olive oil production (150 from abroad (according to a private sector association percent growth). IACE), and in the South region, 81 percent of companies stopped functioning. Exporting industrial sectors were one 3 According to Agency for the Promotion of Industry and of the hardest hit by the lockdown, trade Innovation (APII), in April, projects implementation fell disruptions and sudden drop in global demand by 86.2 percent, investment plans by 14.1 percent and in early 2020. Exports dropped by 23.8 percent employment by 21.5 percent. Recent Economic and Policy Developments 3 TABLE 1 • Tunisia: A Consumption-Driven Growth Contribution share of Contribution in percentage point of average annual growth average annual growth 1991–1995 1996–2000 2001–2005 2006–2010 2011–2015 2016–2018 1991–2010 2011–2018 GDP growth 4.2 5.6 3.9 4.5 1.8 1.8 100.0 100.0 Exports 2.5 2.5 1.8 2.2 -0.5 1.1 49.1 7.7 Imports –1.8 –2.2 –1.5 –3.0 0.0 –1.1 –46.6 –22.0 Consumption 2.7 3.9 3.7 3.7 3.3 2.5 76.8 162.8 Government 0.4 0.8 0.7 0.9 0.8 0.7 15.4 41.1 Private 2.3 3.0 3.0 2.8 2.5 1.8 61.4 121.7 Investment 1.0 1.5 0.4 1.4 –0.5 –0.8 23.3 –34.1 investments are those of smaller exporting firms be attributed to recurrent social tensions, domestic with small projects and limited financial resources security shocks, political and security instability which could have a large aggregate effect on overall including in neighboring Libya and Algeria that employment. have hampered growth. Political transition lasted Following the COVID-19 lockdowns, longer (2011–2014) followed by recurrent political strikes and sit-ins have continued in plants instability with 12 governments since the revolution and mines due to the economic impact of with frequent cabinet reshuffles and changes of key the containment measures. Since end of May ministers. These events have in turn led the falling 2020, social protests started to disrupt production investment trends that has resulted in recent years’ in the energy and mining sites including at the growth as becoming increasingly consumption- phosphate mines in Gafsa, the oil production site driven (Table 1). in Tataouine, and even the newly started Nawara Job creation remained anemic in 2019 gas field. Many of the energy and mining sites are stemming from tepid job creation in both located in the poorest parts of the country with high public and private sectors while the labor force unemployment. These sectors are highly sensitive to participation rate remained stable at a low level. the economic situation, as recurrent social protests The total number of people employed increased by since the revolution have demonstrated. This source 30,200 in 2019 (to 3,527,900 people) down from of instability poses significant risks to the economy 39,600 in 2018. Net job creation has stabilized as the energy and mining sectors account for in the last four years at an average of 35,400 per about 48 percent of GDP (including extraction and year as the post-revolution expansions in the public manufacturing). sector gradually declined and private sector jobs The recent decline in economic growth have remained limited. The biggest sector creating follows a two-decade period of low growth new jobs was the non-manufacturing sector and declining potential output. GDP growth creating a surplus of 24,000 jobs relative to 2018. averaged only 1.5 percent per annum in 2011– The labor force participation rate remained stable 2019 compared to 4.5 percent in 2006–2010. at 47.1 percent in 2019, mainly due to the weak Tunisia’s potential GDP growth is estimated to participation of women (27 percent compared to 68 have dropped by 2 to 2.5 percentage points due to percent for men). declining physical and human capital, persistently low productivity and lower competitiveness after the 4 The second special focus chapter of this report provides revolution (Figure 6).4 The decline in investment can a summary diagnostic of Tunisia’s infrastructure. 4 TUNISIA ECONOMIC MONITOR – THE COVID-19 GLOBAL PANDEMIC SHOCK Tunisia’s unemployment rate edged down External Sector in 2019 but remains high compared to pre-2011 rates. Unemployment has declined from its peak The current account deficit narrowed in 2019 but of 19 percent in 2011 (just after the revolution) to remains high compared to the historical trend. 14.9 percent in 2019 but remained above the pre- Tunisia’s current account deficit declined to 8.8 percent revolution level (Figure 7). In absolute terms, the of GDP in 2019 from a record high 11.1 percent in majority of the unemployed were low-skilled workers 2018 (Figure 9) as the trade deficit improved slightly but university graduates had a higher unemployment to 14 percent of GDP due to lower imports (Figure 10). rate, likely reflecting a high reservation wage and During the first quarter of 2020, the current account limited relevant job opportunities. Unemployment narrowed to 1.7 percent of GDP from 2.2 percent of rates are also much higher for youth (33.8 percent), GDP a year before.5 The GoT/WB report on the impact women (9.6 pp higher than for men), especially of the COVID-19 estimates that tourism receipts could for educated women (38.1 percent of female drop by as much as 85 percent and remittances by as graduates versus 15.7 percent for male graduates) much as 20–30 percent (see Special Focus 1). The and in the lagging interior regions (Figure 8). current account deficit remains high compared to pre- The COVID-19 shock severely impacts the revolution average of 3.6 percent in 2005–2010. Gross labor market outcomes for formal and informal reserve that had continued to shrink during the last 3 workers. Figures in mid-March 2020 (i.e., before years to reach the record low (US$4.4 billion, 72 days the lockdown) already show signs of deterioration of import at end-August 2018) gradually recovered to in the labor market, as the unemployment rate US$7.4 billion at end-2019 (against US$5.2 billion at increased to 15.1 percent. The GoT/WB study on end-2018) on the back notably of FX reforms (lower the macroeconomic impact of the COVID-19 crisis FX intervention, introduction of competitive FX auction (Special Focus 1) finds that employment elasticities and net FX purchases by the Central Bank since May to growth are higher in labor intensive sectors that 2019). As a result, the dinar appreciated by about 9 are highly exposed to the COVID-19 crisis (light percent against the euro in 2019 after several years manufacturing export-oriented sectors, tourism, of depreciation. commerce etc.) and tend to increase in the short-term during recessions. Simulations show that between 25 to 30 percent of jobs (formal and informal) could be 5 The impact of the crisis is not fully reflected as Tunisia lost in the most affected sectors. started the lockdown on March 20, 2020. Unemployment Remains High FIGURE 7 •  …and is Concentrated in the Interior FIGURE 8 •  Especially among Women and Regions Graduates… 30 40 24.8 22.2 Unemplyment rate (%) 35 25 20.3 Unemplyment rate (%) 30 20 17.5 15.3 15.9 25 20 15 10.6 10.2 15 10 10 5 5 0 0 National average Tunis region Center–East North–East Center–West North–West South–East South–West 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Graduates National average Female Source: INS. Source: INS. Recent Economic and Policy Developments 5 The Current Account Deficit and FIGURE 9 •  …as the Trade Balance Shrank in FIGURE 10 •  Reserves Improved in 2019… Most Sectors Due to Lower Imports 12 12,000 5 10 10,000 0 –5 US$, billion 8 8,000 % GDP % GDP 6 6,000 –10 4 4,000 –15 2 2,000 –20 –25 0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (est.) Other manufactured Mechanical & electrical Textiles & clothing Mining Gross official reserves (RHS) Energy Agro–food Current account deficit (LHS) Trade balance Source: BCT. Source: BCT. Despite the depreciation of the dinar percent in nominal terms (compared to a 45 percent and weaker growth in imports the trade deficit increase in 2018) by as olive oil exports significantly improved only marginally. The decline in the 2019 declined (–34.7 percent) due to limited crop in 2018– trade deficit to 14 percent of GDP came mainly due 2019 agricultural season. However, energy exports to slower growth of consumption goods imports increased by 3.9 percent and phosphate exports (4 percent, against 12.5 percent in 2018) and capital increased by 20 percent in 2019.6 imports (9.5 percent, against 15.6 percent in 2018). The tourism sector continued to recover The energy deficit accounts for 40 percent of the in 2019 from the 2015 terrorist attacks but trade deficit, as energy imports increased significantly accounted for a smaller GDP share than in 2010. by almost 40 percent in 2018 and 20 percent in 2019. Tourism receipts reached 4.9 percent of GDP in 2019, The rise in energy imports was mainly due to higher against 2.6 percent in 2016 and well below 6 percent gas imports from Algeria (70 percent growth) and average during the pre-revolution period (2005– compounded by the loss of transit fees paid in gas by 2010). Tourism recovery during the past 2 years Algeria (41 percent decline). was led by the return of Europeans (+42 percent in Slower growth both domestically and in EU 2018 and +15.6 percent in 2019), mainly French (+37 trade partner countries led to a weaker growth in percent and +14 percent), Italians (+17.1 percent Tunisia’s exports in 2019. Export growth slowed to and +21 percent) and Britons (+342 percent and +65 7 percent in nominal terms in 2019 (from 19 percent percent). French visitors who accounted for about 20 in 2018) led by manufacturing exports (80 percent of percent of tourists before the revolution dropped to total exports) falling to 10 percent (from 17 percent 8.6 percent in 2016 after the terrorist attacks but have in 2018) due to weaker Eurozone growth. The continued to increase accounting for 11.2 percent on mechanic and electric export volume contracted average in 2016–2019. On the other hand, following by 2.4 percent in 2019 (and –0.5 percent in 2018), the political instabilities in the Arab world in 2011, reflecting a fall in demand from the European auto Libyans residing in Tunisia peaked to 36 percent of industries. Similarly, textile export volume contracted total entries in 2013, but gradually fell back to about by 6 percent contraction in 2019. Traditionally, Tunisia 24 percent (close to pre-revolution share). Overall, had specialized in textiles but its share in exports has entries from neighboring countries (Libya and Algeria) dropped from 29 percent in 2009 to 21 percent in increased from 42 percent (average 2009–2010) 2019 as a result of policies aiming to specialization in higher value-added products such as mechanic and 6 See the output section for details on oil and phosphate electric manufacturing. Food exports declined by 13 production in Tunisia. 6 TUNISIA ECONOMIC MONITOR – THE COVID-19 GLOBAL PANDEMIC SHOCK Tourist Arrivals Reached an All FIGURE 11 •  … Leading to Higher Revenues While FIGURE 12 •  Time High Thanks to More Neighbor Remittances Grew Despite Growth Visitors… Slowing in Europe 8 8 6 6 Visitors, million 4 4 2 2 0 0 –2 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 France Germany UK Tourism receipts (% GDP) Remittances (% GDP) Italy Algeria Libya France GDP growth Eurozone GDP growth Other countries Tunisia GDP growth Source: BCT. Source: BCT. before the revolution to 63 percent in recent years depreciated in early 2020. The current account deficit (average 2016–2019), signaling a growing regional during the first four months of 2020 reduced to 2.8 tourism trend (Figure 11). percent of GDP from 3.6 percent of GDP a year earlier Remittances edged up in 2019 and due to a lower trade deficit and a denominator effect. have averaged at 4.8 percent of GDP since the In Jan-Apr 2020, both exports and imports dropped revolution. Historically, remittances to Tunisia have by 20.6 percent and 21.5 percent (YoY), respectively, followed a counter-cyclical trend and accounted for 4.5 due to the lockdown. Helped by lower current account percent during the higher growth pre-revolution period deficit, gross reserve recovered to US$7.6 billion (2005–2010). In 2019, despite slower growth both in (about 4 months of import) as of end-May 2020. As a France (the source of almost 60 percent of remittances) result, the dinar has continued to appreciate, to reach and in Tunisia, remittances grew by 15 percent to TND2.86 for US$1 as of end-May 2020 which could reach 5.1 percent of GDP up from 4.8 percent in 2018 impact exports if this trend is maintained. Tunisia is (Figure 12 and Figure 13). Overall, tourism receipts therefore experiencing additional challenges, due to and remittances growths in 2019 (36 percent and 15 the unprecedented situation in which lower current percent respectively) contributed to limit the current account deficit and growing reserve is leading to account deficit. appreciation despite the economic contraction. Foreign direct investment (FDI) has The sudden contraction in demand has led remained weak and unevenly distributed across to a sharp decline in consumption goods trade the country. FDI declined by 9.6 percent in 2019 and (Figure 14). Export and import of consumption reached 2.1 percent of GDP, a lower share than the goods declined by 31.5 percent and 21.6 percent, post-revolution average of 2.4 percent. The drop was respectively, during the first four months of 2020. The mainly driven by services (–51 percent) and agro-food most significant drop in export was textiles (–33.6 (-75 percent). Greater Tunis absorbs more than 40 percent), followed by mechanic and electric sector percent of the non-energy FDI for the country, followed (–25 percent) and other manufacturing goods (–26.4 by North East (20.4 percent), Center East (16 percent), percent). The contraction in imports was also driven South East (10.1 percent), South West (8.7 percent) by textiles (–28.5 percent) and mechanic and electric and North West (0.4 percent), reflecting regional sector (–24.9 percent). Tunisia’s strong specialization disparities and high unemployment in remote regions. in these sectors has been led by the export-oriented The trade decline due to COVID-19 has led companies, mostly reliant on foreign capital, which to a smaller current account deficit as the dinar saw their export drop by 27.6 percent during the same Recent Economic and Policy Developments 7 EU Countries Are the Major Source FIGURE 13 •  In 4M 2020 the Trade Deficit FIGURE 14 •  of Tunisia’s Remittances Reduced as Demand Weakened Canada 1% UK 1% 2 Belgium 1% 0.750 0.861 0.443 USA 2% 0 Others 6% –1.687 –1.712 TND, billion Switzerland 2% –2 –2.425 –2.178 –1.535 Saudi Arabia 2% –4 –2.037 –2.047 –2.026 Israel 4% –6 –2.308 Germany 5% –8 France 4 mths 2018 4 mths 2019 4 mths 2020 Italy 59% 17% Other manufacturing industries Mechanical & electrical Textiles & clothing Mining Energy Agro–food Source: BCT. Source: INS. Note: Data for 2017. period (compared to –1.4 percent for others). This trend further. Contrary to the past counter cyclical trend in could impact foreign investors and discourage further remittances, due to the global nature of the crisis and FDI. Capital imports also contracted by 28.7 percent more specifically in France (source of almost 60 percent in Jan–Apr 2020 which combined with the already low of remittances) remittances have declined and are capital import growth in 2019 could lead to negative expected to continue to do so in the following months. impacts on the export and growth in the medium term. In line with the global decline in capital Energy and agro-food were the only sectors flows, FDI contracted significantly in early-2020. that saw their exports grow during the first four During the first quarter of 2020, FDI contracted by months of 2020. Agro-food export increased by 23.8 percent YoY. This large drop is significant as the 4.8 percent compared to a year earlier, while its global and domestic lockdowns mainly started mid- imports were reduced by 9.5 percent, reflecting a March. Energy and industries are the most affected better agricultural season. Energy sector, however, sectors which saw FDI contractions of 18.6 percent was affected by the sharp fall in international prices, and 21.5 percent, respectively. which is reflected by lower export growth (9.7 percent against 24.9 percent a year earlier) and a contraction in imports (–18.9 percent against +38.4 percent Public Sector Finances 2019). Similarly, while phosphate exports decreased only by 5.9 percent YoY in Jan–Apr 2020, production The fiscal deficit continued to decline in 2019 reduced by 17 percent and extraction by 48 percent, reaching 4.1 percent of GDP following consolida- which could negatively impact exports in the following tion measures but remains high considering the months. growing public debt burden (Figure 15). Tunisia’s fis- Tourism receipts contracted by 31 percent cal deficit rose from an average of 1.8 percent of GDP (YoY) in May 2020 while the decline in remittances before the revolution (2007–2010) to 5.1 percent on av- was smaller at 9.5 percent YoY. The negative impact erage during the post-revolution period (2011–2019). of global lockdown on Tunisia’s tourism sector adds As a result, public debt has continued to increase, from to the additional difficulties that the tourism sector 41 percent of GDP in 2010 to a record high of 72.6 per- had accumulated since the revolution and the terrorist cent in 2019. Fiscal consolidation attempts started only attack of 2015, in addition to the challenges related to after the political transition in 2015. The measures imple- the past policy and investment for development of mass mented include subsidy reforms in 2016, civil servants’ tourism. As such, the sector constitutes a large share of system reform in 2017 on the expenditure side and the the NPLs in the banking sector which are likely to rise tax reform since 2018 on the revenue side. For expendi- 8 TUNISIA ECONOMIC MONITOR – THE COVID-19 GLOBAL PANDEMIC SHOCK The Fiscal Deficit and Public Debt FIGURE 15 •  …as Revenues Improved Thanks to FIGURE 16 •  Marginally Improved in 2019… Higher Direct Tax Receipts 8 90 30 7 80 25 6 70 60 20 5 % GDP 15 % GDP % GDP 50 4 40 10 3 30 2 5 20 1 10 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (est.) 0 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 (est.) Direct tax Trade tax VAT Public debt (RHS) Fiscal deficit (LHS) Excise Other indirect taxes Nontax revenue Source: Ministry of Finance (MoF). Source: MoF. tures, measures were taken in the supplemental budget for both private sector and administration. The at the end of the year to limit the current spending by WB has continued to support Government to delaying recruitments, freezing payment commitments streamline the complex investment and incentives earlier than in previous years, cutting spending on oth- schemes and to prepare the new investment law. er goods and services (including capital expenditures). Tunisia adopted a new investment law in The government had also implemented exceptional 2016 which replaces complex incentives and one-off contributions in 2014 (amounting to 0.4 percent tax expenditure schemes with new tax rates. In of GDP) and in 2017 a corporate income tax top-up of December 2018, following the transition period after 7.5 percentage points (pp). introduction of 10 percent corporate tax in 2014 on Tax revenues have grown as a share of offshore companies, the preferential tax regime for GDP due to increase in rates but the tax base offshore sector ended. The 2019 Budget Law also remained narrow. Government tax revenues have included removal of tax exemptions on regional increased from 19.4 percent of GDP on average development zones and introduced a 10 percent before the revolution (2004–2010) to 25.4 percent tax rate for these zone. As a result of consolidation in 2019 (Figure 16). The increase was mainly driven of tax expenditure into the unified tax framework with by income taxes which grew in nominal terms by 78 differentiated rates covering all the sectors, four main percent from 2010 to 2018 (7.9 percent annually corporate tax rates have been instated (Table 2). on average) and by 41 percent in 2019, following In parallel, the government has been preparing the the tax reform implemented since 2018. Tunisia’s implementation of the newly adopted investment tax to GDP ratio is high compared to lower middle law, it clarified: (i) definition and list of the financial income country average (12 percent), to OECD (15.3 incentives (decree n°2017-389) and (ii) definition percent) or World average (15 percent). Despite and lists of tax incentives (law n° 2017-8 and its high tax effort of 25 percent, the tax base remained implementing decrees n°2017-418, n°2017-419, narrow partly due to the complex exemptions n°2018-613). In addition, the government reinforced and incentives system until 2018, which mainly tax administration, increased the 3 VAT rates (6%, included foreign capital exporting sector (also 12%, 18%) by 1 pp each and the tax on dividend from called “offshore” sector) and regional development 5 to 10 percent in 2018 (Budget Law 2019). zones, as well as some professions that are under On the expenditure side, the public wage taxed. As such, the tax burden was concentrated bill was the largest spending item and the main on a small part of the economy. Tax expenditure driver of spending growth. The wage bill almost has been too complex and lacks transparency tripled in nominal terms since 2010 and reached Recent Economic and Policy Developments 9 TABLE 2 • Corporate Tax Rates Have Been Reformed Before 2005 2006 2014 2018 2019 Onshore company 35% 30% 25% 10% (regional development zones) 10% (small companies, regional development zones, employment program) 20% (SME*) (13.5% from 2021, exporting companies) 25% Standard 20% (SME service) 35% (other) 25% (Standard) Offshore company 0% 0% 10% 10% 35% (finance, telecom, energy, large retails, and franchising) * initially introduced for small companies to compensate the 5 percent increase of tax on dividend. 14.7 percent of GDP in 2019 (Figure 17). While hiring March 2019 to improve targeting in social spending. was the main contributor to the wage bill growth in Moreover, the reform of the public pension fund the 2013–2014 period, since then, general and Caisse Nationale de Retraite et de Prévoyance Sociale specific wage increases have been the main sources (CNRPS) was initiated since April 2019 to improve its of public wage bill increases. The government has financial viability. maintained annual hiring limits and been reducing Despite these reforms, current spending promotions in the recent years. It also launched a has steadily grown, reaching a record high of voluntary departure and an early retirement programs 26.4 percent of GDP in 2019 (Figure 17). The in 2017–2018 but with limited uptake highlighting the increase in the GDP share of current expenditures in challenges to adjusting staffing and the rigidity of the 2019 (e.g., against 17.9 percent in 2010) has largely wage bill. been due to the rising wage bill (due to large hiring Subsidy expenditures declined in 2019 to in the public sector since the revolution), transfers 4.2 percent of GDP, down from a record high of 7.3 and interest payments which have more than offset percent of GDP in 2013 (Figure 17). Over the recent the subsidy reform savings. Interest payment grew years, the energy subsidy reform has contributed significantly, from 1.8 percent of GDP in 2010 to 2.8 to a decline of energy subsidies from its peak of percent in 2019 (277 percent nominal growth) as 6.1 percent of energy subsidy (including arrears) public debt has continued to grow. As a result, capital (Figure 18 …while subsidies and transfers remain expenditures decreased to 5 percent of GDP from 6.5 high). The decline in the subsidy bill is also associated percent in 2010. The high level of current expenditures with the recent lower international prices. Food and has constrained capital expenditures and has further transport subsidy scheme have remained unchanged weakened the economy’s growth potential. since the revolution.7 As a result, subsidies fell to 2.5 The largest Tunisian state owned percent in 2016, before increasing again in 2018 due enterprises (SOEs) were loss-making, even before to the hike in international prices. The overall subsidy the COVID-19 crisis.8 According to a report annexed bill still remains above the 2010 value of 2.4 percent of GDP at the peak of the global commodity cycle. 7 One of the first measures taken during the revolution was While energy subsidies have reduced, to re-introduce some key staple foods such as milk, sugar, social transfers aimed at improving social safety tomato paste, couscous and pasta into food subsidy net coverage have expanded. The transfers scheme, in order to address the social demands. At have increased partly due to a wider coverage of particular times of the year or in the event of critical shortage, subsidies are also applied temporarily to other products. the National Program of Assistance to Vulnerable 8 As heritage from socialist period, Tunisia still has a large public Families and improved access to public health care enterprises sector, with 199 entities: 102 public enterprises for low-income households. A social database for low- (including 46 corporations), 73 non administrative income households (AMEN) was also established in public enterprises, and 24 public health structures. 10 TUNISIA ECONOMIC MONITOR – THE COVID-19 GLOBAL PANDEMIC SHOCK Government Expenditures Is FIGURE 17 •  …while Subsidies and Transfers FIGURE 18 •  Dominated by Growing Wages… Remain High 40 12 10 30 8 % GDP % GDP 20 6 4 10 2 0 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (est.) (est.) Wages Subsidies Transfers Interest Food subsidies Energy subsidies Other current expeditures Capital expenditures Transport subsidies Transfers Source: MoF. Source: MoF. to the 2020 Budget Law, the total losses of a sample of placed Tunisia on review for downgrade in April 2020, 34 SOEs (accounting for 88 percent of SOE revenues reflecting the acute tightening in global financing and 75 percent of SOE employment) reached TND3.5 conditions and higher risks. billion in 2018 (3.3 percent of GDP). SOE debt Since the beginning of the COVID-19 guaranteed by the State reached 15.7 percent of GDP pandemic, the authorities have announced a (as of mid-2019) from which 81 percent is foreign debt range of measures to support businesses and and 48 percent is for the power company. While no households. The first emergency measures taken new borrowing was contracted with State guarantee by government consisted of providing additional in 2016–2017, several SOEs received government resources to the health sector as well as to support support in 2018 and 2019 (when the economic poor and vulnerable households (costed at US$1 situation worsened due to lower growth, currency billion to cover needs for March-May 2020). The depreciation) in the form of treasury loans, notably to government and the Central Bank of Tunisia (BCT) repay external debt guaranteed by the State.9 Various also took a series of fiscal and monetary measures guarantees on SOE domestic debt were triggered to support the economy and affected businesses between 2016 and 2018 but the total amount of the in line with international experience of country triggered guarantees remains low.10 responses to the crisis (Box 1). Measures have Tunisia’s sovereign credit rating has included support fund for SMEs and various tax deteriorated despite access to concessional measures. In addition, the cap that fully exporting sources of financing. Tunisia successfully raised companies were allowed to sell on the domestic Euro695 million in July 2019 through bond issuance. market was increased from the usual 30 percent of The country continues to rely mainly on budget turnovers to 50 percent. support operations from the IMF, the European Union, World Bank, the African Development Bank, and more recently from KfW and Saudi Arabia. Following 9 It included one utility and three SOEs in the transport, three years of overall stable sovereign ratings, several energy and industrial sector. major agencies downgraded Tunisia in 2017 and 10 To strengthen management of contingent fiscal risks, 2018: Fitch from BB– to B+ in early February 2017, the government launched its SOE reform strategy since 2015, aimed at improving SOE governance and Ratings and Investment Information (R&I) from BB+ efficiency. As part of the strategy, it implemented a to BB in May, and Moody’s from Ba3 to B1 in August performance contract with the 3 public banks and 4 2017 and further to B2 in March 2018. The ratings large loss making SOEs, which included technical, have remained stable since then, however Moody’s commercial and financial performance indicators. Recent Economic and Policy Developments 11 BOX 1. GoT’S KEY ECONOMIC SUPPORT SCHEMES DURING THE COVID-19 OUTBREAK • Creation of a TND300 million support fund for SMEs. • Creation of a TND700 million fund to restructure companies in difficulty. • Postponement to the end of May 2020 of corporate tax returns (previous deadline March 25), except for companies subject to the wealth tax at the rate of 35%. • Suspending all tax audit operations and appeal deadlines until the end of May 2020. • Reduction of deadlines for refunding tax credits to a maximum of one month. • Exemption of customs penalties established before March 20, 2020, with payment of duties and taxes due and a fixed penalty of 10%. Measures for exporting companies: • Possibility for companies operating in the food industry and health sector to sell on the local market up to 100% of their production during the year 2020. • For the other exporting companies in the other activity sectors, increase of the quota from 30 to 50% during the year 2020. Measures for most affected companies: • Creation of a committee, within the Presidency of the government, dedicated to monitoring the companies most affected by the crisis with the possibility of rescheduling the tax debts of these companies over a period of up to 7 years. • Suspension for these companies of the application of late payment penalties for a period of 3 months from April 1, 2020. Measures for Banking and Financial sector • Cut in the policy interest rate by 100bppt, to 6.75 percent. • Request from the Central Bank to suspend distribution of banks and financial institutions dividends for the 2019 financial year. • Suspension of fee on withdrawal, electronic payment of below TND100, and establishment of free banking card. • Relaxation of the loan-to-deposit ratio requirements for the banking sector. • Defer payments on bank credits and on non-professional loans. • Extension of the list of assets eligible as collateral for refinancing operations. • Creation of investment funds (TND600 million) with a public guarantee (TND100 million) mechanism to cover up to TND500 million of new credits. • Difference between the policy rate and the effective interest rate (until 3%) on investment loans to be supported by the government. • Exceptional financing for private companies’ cashflow in 2020 up to 25% of 2019 turnover (without tax) or up to 6 months of wage bill for newly created companies since January 2019. Monetary Sector and Financial Market. Monetary Sector and Financial percent, albeit slightly lower than the 2018 rate of Market 8.2 percent. Electricity and gas prices continued to increase until July 2019 due to the energy subsidy Consumer Price Inflation (CPI) declined in 2019 reform and volatile and high food prices (see Box 2). despite energy price reforms and higher food CPI accelerated after March 2020 largely prices. Inflation eased to 6.7 percent on average in due to supply shocks from the COVID-19 2019 thanks to tighter monetary policy in conjunction pandemic. In the beginning of 2020, inflation with implementation of monetary and banking initially decelerated to 5.8 percent (YoY) in February sector reforms. Inflation decelerated to 6.1 percent 2020. In March, only two weeks after the start of the in December 2019 (YoY), down from a peak of 7.7 lockdown, CPI edged up to 6.2 percent (YoY) due percent in July 2018 (Figure 19). During 2019, to the disruption of supply chain and uncertainty as inflation was driven by a high core inflation of 7.2 well as changes in consumption behavior. Inflation 12 TUNISIA ECONOMIC MONITOR – THE COVID-19 GLOBAL PANDEMIC SHOCK FIGURE 19 • Consumer Price Inflation Declined in …as BCT Pursued a Less FIGURE 20 •  2019… Accommodative Stance 10 8 Contribution (pp), YoY Inflation (%) 8 Interest rate (%) 6 4 3 2 0 –2 Jan–16 Jun–16 Nov–16 Apr–17 Sep–17 Feb–18 Jul–18 Dec–18 May–19 Oct–19 Mar–20 Jan–16 May–16 Sep–16 Jan–17 May–17 Sep–17 Jan–18 May–18 Sep–18 Jan–19 May–19 Sep–19 Jan–20 May–20 Food and beverages Utilities Transport Money market interest rate) Central Bank policy rate Clothing and footwear Furnishings Health Lower corridor Upper corridor Restaurants and hotels Other CPI (YoY, %) Policy rate–CPI dif. Source: INS. Source: BCT. reached 6.3 percent (YoY) in April 2020, driven by refinancing (TND 9.8 billion as of April 2020, its food prices increase of 6.2 percent (YoY) also linked lowest level since 2017 and lower than the TND14.3 to the higher demand during Ramadan. Food price billion in June 2018) and stricter enforcement of loan- inflation rose by 5.1 percent from 3.7 percent (YoY) to-deposit ratio limits resulted in a lower and more a month earlier in March 2020. Administered prices stable money market interest rate. The introduction on basic goods limited the price increase for these of competitive BCT foreign currency exchange (FX) goods to 5.5 percent (YoY), while non-administered auctions in August 2018 and their operationalization food price and core inflation stood at 7.1 percent and since May 2019 have also contributed to the reduction 7 percent (YoY) in April 2020, respectively.11 of liquidity injections through BCT FX swaps. In the BCT’s tighter monetary policy contributed first four months of 2020, liquidity grew, including to the inflation decline in 2019 (Figure 20). The during the lockdown. The M3 money aggregate grew policy rate was increased five times between April by 11 percent (YoY) in March and 13.3 percent (YoY) 2017 and February 2019 to a cumulative 300 bps to April 2020. Credit to the government grew faster at keep the rate in positive territory in real terms. The 27.3 percent (YoY) in April 2020. However, overall BCT shifted its policy from monetary tightening to credit issuance has remained weak and grew by 5.1 almost zero real interest rate to support the economy percent (YoY) and 4.3 percent (YoY) in March and during the COVID-19 outbreak. Despite the price April, respectively. increase, BCT reduced its policy rate by 100bps to Introduction of competitive FX auction and 6.75 percent in March 2020, to support the economy. purchases by BCT have contributed to greater Despite monetary tightening, liquidity exchange rate flexibility. In May 2019, the BCT growth has continued since the last quarter introduced an auction bidding mechanism for FX of 2019 as implemented reforms reversed trade replacing the previous strategy of direct sizable the previous low liquidity trend. Broad money and continuous injections to the FX market. The spot (M3) grew faster at 8.4 percent in 2019 compared exchange rate reached TND3 to US$1 in February to 6.6 percent a year earlier (Figure 21). However, 2019 slightly appreciated to TND2.93 at the end of credit to the economy increased only by 3.5 percent, the lowest level since the 2000s, as result of less accommodative monetary policy. Tighter monetary 11 Supply disruptions and large shifts in consumption of policy including keeping positive real interest rates, some goods are not immediately reflected in inflation as widening of the interest rate corridor (from 25bps almost two-thirds of the CPI basket consists of items with to 100bps in January 2018), lower central bank administered prices. Recent Economic and Policy Developments 13 BOX 2. FOOD AND ENERGY SUBSIDY SCHEMES: BACKGROUND AND PANDEMIC DEVELOPMENTS Food shortages amid lockdowns While the subsidies reform implemented in the past had removed several products from the CGC scheme, including milk since 2008, one of the first measures taken during the revolution was to reintroduce some key staple foods such as milk, sugar, tomato paste, couscous and pasta into the subsidy scheme in order to address social demands. Contrary to the energy subsidy, the government avoided reforming food subsidy due to social sensitivities. These goods have therefore remained subsidized and their nominal prices have remained unchanged since 2012. The food subsidy amount has remained broadly stable since the revolution, averaging 1.7 percent of GDP. However, shortage of subsidized goods due to cross-border smuggling to neighboring countries (goods such as milk, sugar and water) was frequent in recent years. The shortages became acute at the beginning of the COVID-19 lockdowns especially for bread and couscous due to hoarding and smuggling. Lower energy subsidies: reforms and low oil prices Tunisian oil production increased during the 2000s, but is currently facing a natural decline in recovery rates. After soaring energy subsidies in the peak of oil price, Tunisia started implementing energy price reforms in 2012 by gradually increasing prices. With lower international oil prices in 2016, as a second step to the subsidy reform, the energy price structure was modified through an increase of excise tax that translated to a 5 percent decline in retail fuel prices due to the earlier adoption of an automatic fuel price adjustment mechanism in July 2015. The government adjusted fuel prices four times in 2018 and in March 2019, and electricity and gas tariffs four times in 2018. In addition, it implemented a 10 percent increase in electricity and gas tariffs for higher volume-users for low pressure customers in May 2019 and a price increase of 24 percent for medium pressure customers over January to December 2019. Lower global prices combined with the reform implementation helped to reduce the energy subsidy share of GDP from a high of 5 percent of GDP in 2013 (including arrears on energy/ power companies) to 0.7 percent in 2019. As oil prices hit a record low with the COVID-19 outbreak, the government estimates subsidy gains of around TND1000 which will be redirected to cover higher transfers both to vulnerable families and the private sector. FIGURE 21 • Liquidity and Credit Growth Euro/TND and USD/TND (Average FIGURE 22 •  Interbank Rate) 50 4 110 REER index (Jan 2010=100) 40 YoY growth (%) 30 3.5 100 20 3 90 ER (TND) 10 2.5 80 0 –10 2 70 Jan–16 May–16 Sep–16 Jan–17 May–17 Sep–17 Jan–18 May–18 Sep–18 Jan–19 May–19 Sep–19 Jan–20 1.5 60 1 50 Feb–15 Aug–15 Feb–16 Aug–16 Feb–17 Aug–17 Feb–18 Aug–18 Feb–19 Aug–19 Feb–20 M3 Credit to the government Credit to the economy USD (LHS) Euro (LHS) REER (RHS) Source: BCT. Source: BCT and World Bank staff calculations. 2019, and further to TND2.86 as of end-May 2020 regulatory framework to gradually converge towards following the lockdown (Figure 22). Basel III standards. Other reforms also covered The banking sector remains stable but corporate governance and recapitalization of public suffers from low liquidity. After a record high banks. Write-offs were adopted in 2018–2019 which NPL ratio of 16.6 percent in 2015 following the contributed to cleaning of the banks’ portfolio by worsening of the banks’ portfolios after the revolution, transferring bad loans to the dispute stage. These large banking sector reforms were initiated. These reforms have helped lower the NPL ratio, but the ratio measures included a tighter supervision and still remains high at 14.5 percent (as of December 14 TUNISIA ECONOMIC MONITOR – THE COVID-19 GLOBAL PANDEMIC SHOCK 2019) despite a relatively modest liquidity growth. The fees on cash withdrawals and small electronic capital adequacy ratio has improved to 12.4 percent, transactions below TND100. Microfinance schemes the highest level since the revolution. In general, supporting over 400,000 micro-entrepreneurs from banks do not have major liabilities to foreign partners, the most vulnerable segments (such as women and and net FX open positions are small relative to their smallholder farmers) have also come under pressure capital. Credit risk remains a concern due to banks’ as a result of the crisis. The sector has suddenly exposure to interest rate-linked debt of households faced higher borrowing costs which have in turn and corporations with uncertain earning potential. led to deteriorating credit quality in a background Nevertheless, the ratio of liquid assets to total assets of limited liquidity. Without support from regulatory decreased to 4.5 percent at end-2018 from 5.7 authorities, shareholders or lenders, the sector could percent at end-2017, and the ratio of liquid assets face solvency issues, threatening to undo years of to short-term liabilities to 75.2 percent from 91.7 reforms for this critical subset of the financial sector. percent, reflecting tight liquidity. As of March 2020, The authorities announced a series of economic and five banks were not compliant with the minimum financial measures in response to the crisis (Box 1). liquidity coverage ratio (LCR) that was increased to The relative small size of the Tunisian stock 100 percent in January 2020. market restricts a large exposure of the sector The banking sector remains vulnerable to shocks. The Tunindex declined by 3 percent to shocks particularly in tourism and industrial at end-2019 due to weak overall economic growth sectors. Tunisian banks have thin capital buffers, and political uncertainty (electoral campaigns, long low liquidity and solvency ratios as well as high NPLs, process of government formation leading to worsening particularly in public banks. The Tunisian banking business environment). The index had previously sector remains vulnerable to macroeconomic due to structural deficiencies (including high concentration FIGURE 23 • The Stock Market Index Contracted of major banks and reporting deficiencies) but has in 2019 limited direct exposure to sovereign debt and FX denominated liabilities.12 As such, it enters the current 25% COVID-19 crisis constrained in its ability to effectively 20% play a counter-cyclical role, notably in terms of 16.2% 14.4% 15% 15.8% restructuring credits, absorbing losses and deploying new resources. NPLs are of concern as the existing 10% Growth 8.9% stock is expected to be compounded by new waves 5% of NPLs stemming from COVID-19 shocks. The stock of NPLs is highly exposed to the industrial and tourism 0% –0.9% sectors, both of which are expected to be hard hit by –5% –2.8% –4.3% the ongoing crisis. –7.6 –10% Tunisia’s financial sector enters the 2011 2012 2013 2014 2015 2016 2017 2018 2019 current COVID-19 crisis constrained in its ability to effectively play a counter-cyclical role due to Market Capitalization TUNINDEX low financial inclusion. Low penetration of digital Source: WB staff calculations using BVMT data. financial services restricts the authorities’ deployment of urgent measures which are particularly needed in an economic lockdown and social distancing environment including for social transfers and 12 For a background on the banking sector’s structural financial inclusion. To encourage the digital banking, challenges see IMF’s Financial System Stability as part of the COVID-19 measures, the banks were Assessment (2012) and Extended Fund Facility Fifth directed to issue bank cards for free and waive Review (2019) reports. Recent Economic and Policy Developments 15 COVID-19 Directly Impacted Sectors FIGURE 24 •  grown by 14 percent and 16 percent in 2017 and Have Small Stock Market Presence 2018, respectively (Figure 23). As of April 2020, the index has fallen by 12.8 percent following losses of 1% 2% 9.6 percent in March and 4.2 percent in April. The 4% Tunindex has lower exposure risk to the COVID-19 6% crisis as 47 percent of its capitalization is accounted 7% for by banks and financial entities (Figure 24). Most companies in the sectors that are directly exposed to 47% the risks such as tourism, energy and transport are not listed on the stock market (except Tunisair). With 33% market capitalization at 25 percent of GDP (compared to 52 percent in Morocco and 54 percent in Vietnam), the Tunisian stock market remains small. In order to limit the volatility during the global financial instability Others Health Basic materiels Services related to the outbreak, the Tunisian stock market Industries Consumption goods Finance reduced the daily variation to 3 percent from the usual Source: Tunisian Stock Market. 6 percent tolerance margin. BOX 3. ANTI-MONEY LAUNDERING AND COMBATING THE FINANCING OF TERRORISM Tunisia was officially removed from the list of “gray” jurisdictions of the Financial Action Task Force (FATF) on October 2019. Tunisia was on the list since November 2017 due to significant deficiencies in its Anti-Money Laundering and Combating the Financing of Terrorism (AML/ CFT) framework. The EU Parliament had also put Tunisia on its own similar list. Tunisia was listed as a non-cooperative fiscal jurisdiction by the EU in December 2017. These measures posed significant risks for Tunisia’s banking and financial sector in the form of a deterioration of investor confidence and a loss of access to correspondent banking services, which would especially hurt cross-border payments, trade finance, and remittances. In January 2018, the government made a commitment to the EU Parliament to enact reforms and was delisted as a non-cooperating fiscal jurisdiction. The Government also implemented an action plan agreed with FATF to address deficiencies in its AML/CFT framework . As a result, Tunisia is now rated “Compliant” with (10) Recommendations, “Largely Compliant” with (26) Recommendations, and “Partially Compliant” with (4) Recommendations, according to the MENAFATF procedures. Tunisia remains under enhanced follow-up, and is expected to submit its 5th Enhanced Follow-Up Report (FUR) in November 2020. 16 TUNISIA ECONOMIC MONITOR – THE COVID-19 GLOBAL PANDEMIC SHOCK 2 OUTLOOK AND RISKS T unisia’s economy is expected to enter a are transports and commerce. GDP contraction is severe recession in 2020 (the deepest projected to slow in subsequent quarters of 2020 (Q3 since 1960s) as COVID-19 mitigation and Q4) as containment measures are eased and measures negatively impact domestic economic economic activity slowly recovers. activity. Economic growth is projected to contract Tunisia’s economy will also be negatively by 4 percent in 2020 with 2020Q2 GDP expected impacted through external channels due to to sharply decline when the majority of Tunisa’s the COVID-19 economic recession in Europe. three month lockdown period (which started in Economic activity in the world is estimated to contract the third week of March) occurred. Domestically, by 4.9 percent in 2020 while the Euro Area GDP is border closures, confinements and other mitigation projected to contract by 10.2 percent. Almost 60 measures will lead to a simultaneous supply and percent of Tunisia’s exports in 2019 was destined demand shock as supply chains are disrupted to France, Italy and Germany, countries whose and consumption is negatively impacted by the economies are projected to contract between 7.8 to crisis uncertainties, respectively. Key sectors that 12.5 percent in 2020 due to COVID-19 (Table 3). These will be impacted through the domestic channel dynamics will mean that export-oriented industries and TABLE 3 • Tunisia’s Main Export Partners Will Undergo a Severe Recession in 2020 Tunisia’s exports share (%) GDP growth (%) 2019 2015–2019 2020f 2021f France 29.1 1.50 –12.5 7.3 Italy 16.2 0.96 –12.8 6.3 Germany 12.8 1.70 –7.8 5.4 World 100 3.45 –4.9 5.4 Source: WB staff calculations using INS and IMF WEO (Apr and Jun 2020). 17 services such as tourism, mechanical and electrical a modest decline in the overall external deficit while FDI products and textiles will be heavily impacted in 2020. inflows are expected to remain muted in the medium- GDP growth is projected to rebound in 2021 term. Exchange rate flexibility will be critical to limit but will remain subdued in the following years due Tunisia’s external imbalances. Continued BCT com- to the longer term impact of the crisis. In 2021, the mitment to maintaining competitive FX auctions (intro- economy is projected to recovery by 4.2 percent to duced in mid-2018) and net FX purchases by the BCT return economic activity to that of the pre-COVID-19 (since May 2019) could facilitate exchange rate flexibil- period. The economic outlook is subject to risks firmly ity to help alleviate pressures on international reserves. on the downside and the possibility of a weaker recovery The main risks facing Tunisia’s economy is relatively high. The magnitude of the recovery will are related to a potential worsening of the depend on the evolution of the pandemic, changes economic situation due to COVID-19 and political in behavior of firms and the speed of the rebound uncertainties. The intensity and duration of the in demand both domestically and in trade partner COVID-19 global crisis will heavily impact Tunisia’s countries, as well as the pace of normalization of supply path to economic recovery. The economic contraction chains. The projections after 2021 assume a return to in 2020 could be substantially deeper if the COVID-19 relatively moderate potential growth trend around the outbreak leads to cycles of confinement and 2.5–2.8 percent annual historical growth. Government deconfinement due to a resurgence of cases, both reforms could increase potential output even if the domestically and in trade partner countries. Even global health and economic context may not be when production resumes many sectors may continue conducive to the rapid materialization of their full impact. to be affected by potential disruptions of supply Government finances will be substantially chains. The depth of the recession could be partly impacted by the COVID-19 outbreak and fiscal mitigated by the growth in agriculture thanks to a good risks are expected to mount further. The fiscal agricultural season and public administration activities deficit is expected to increase to 5 percent of GDP in (jointly accounting for 30 percent of GDP). The fiscal 2020 as revenues decline and lower energy subsidies deficit and government financing needs would further due to the oil price decline is compensated by social increase if strict confinements return due to resurgence transfers and support to the private sector. Fiscal space of COVID-19 and global demand remains depressed. for economic and social support is limited as a strong Contingent liabilities of SOEs, especially in affected decline in both tax and non-tax revenues (partly due to sectors such as utilities and the transport sector, weak financial performance of SOEs) is expected in could exacerbate pressures on government finances. 2020–2021. Capital spending is projected to contract Tunisia’s public debt vulnerabilities are partially as the government is delaying non-priority, non-health mitigated by its low average interest rate and long and education investments. The public debt-to-GDP maturity as around half of the debt in 2019 was owed ratio is projected to remain well above the emerging to multilateral and bilateral financiers. The sustainability market debt burden benchmark of 70 percent and is of the fiscal outlook hinges on a significant narrowing sensitive to exchange rate depreciation. of the primary balance to lower the debt-to-GDP ratio. Tunisia’s current account deficit is projected Lower global oil prices provides a unique opportunity to decline as COVID-19 leads to suppressed do- for the acceleration of reforms to strengthen safety nets mestic demand and lower global energy prices. and to reduce energy subsidies in a more sustained Imports are expected to contract at a faster pace rela- manner. The COVID-19 crisis has intensified the tive to exports in 2020 due to a reduction in energy, con- country’s long standing structural deficiencies and sumption and capital imports. The COVID-19 outbreak heightened social frustration which could lead to is expected to negatively impact services exports in the social instability. The recent political uncertainties tourism. Remittances are expected to also contract as after the resignation of the government in July 2020 the bulk of remittances originate from the hardest hit highlights the most important challenge facing the European countries. Following the economic recovery Tunisian economy as maintaining political stability that in 2021, net export growth is expected to contribute to is needed to implement overdue structural reforms. 18 TUNISIA ECONOMIC MONITOR – THE COVID-19 GLOBAL PANDEMIC SHOCK SPECIAL FOCUS Special Focus 1: The Macroeconomic number of new cases quickly climbed in the second Impacts of the COVID-19 on the half of March reaching a peak of 59 daily diagnosed Tunisian Economy cases (Figure 25). The number of reported daily cases stabilized in April (19 cases per day on average) and The Tunisian economy is expected to undergo a deep reached zero for a number of consecutive days in recession as economic activity plummets due the early May as strict social distancing measures were COVID-19 pandemic. The country has successfully implemented. The average growth factor over the controlled the number of confirmed cases thanks March 30 to April 13 period 1.1 but had reached 3.0 to the quick adoption of strict measures to curb in its peak but has gradually declined since then.14 the spread. However, economic growth in 2020 is The pandemic has placed additional pressures on projected to be 5.5 percentage points lower than in the county’s limited medical capacities. In the overall the absence of the pandemic and lead to the deepest ranking of the Global Health Security Index Tunisia recession in the country’s history since the 1960s. currently ranks 122 out of 195 countries (21 out of 54 The majority of the impact relates to the decline in in Africa and 28 out of 45 in the MENA region). The demand and supply disruptions both domestically country’s rank by subcomponents varies but generally and in major trading partners in Europe due to the falls within the bottom half of the overall list (Figure 26). enforced containment measures.13 COVID-19 Spread in Tunisia 13 This report presents the main findings of a joint GoT/WB Tunisia controlled the initial rapid spread of assessment conducted in April 2020. 14 The growth factor is defined as the ratio of the number of COVID-19 despite limited capacities of the health new diagnosed cases in each day to that of the previous sector. The first confirmed case of COVID-19 was day. A growth factor of greater than 1 indicates an reported on March 2, almost 1.5 months after the increasing trend of contamination while a value of less first COVID-19 case in China were diagnosed. The than one represents a decelerating rate. 19 Strict Lockdown Measures Have FIGURE 25 •  Tunisia’s Health Security Ranks in FIGURE 26 •  Limited COVID-19 Cases in Tunisia the Bottom Half of World Rankings 1400 70 200 177 180 Tunisia's rank (out of 196) 1200 60 160 136 140 1000 50 New daily cases 120 Cumulative cases 99 100 800 40 100 87 91 80 600 30 60 40 400 20 20 200 10 0 Prevention Detecting and reporting Responsiveness speed Health system Compliance with international standards Risk 0 0 2-Mar 2-Apr 2-May 2-Jun Confirmed cases (cumulative) (LHS) Daily new confirmed cases (RHS) Source: covid-19.tn. Source: Global Health Security Index (2019). The authorities implemented stringent one month of containment is estimated to lead to a loss health measures to control the spread in line of economic growth by 0.7 to 0.9 percentage points. with international experiences and World Health However, the economic effect are likely to be non- Organization recommendations. A range of linear and not necessarily cumulative. The Government health mitigation measures were adopted including of Tunisia has initiated an immediate response to curfews, confinements, social distancing, closure mitigate the negative economic impact of COVID-19 of schools, universities and other public gathering on households and businesses (see Table 1). spaces, cancellation of public demonstrations and ceremonies, border closures, travel restrictions Economic Impact of COVID-19 internationally and between the country’s governorates with the exception of emergency travel The unprecedented scope of the COVID-19 including the repatriation of Tunisians stranded outbreak could lead to a significant socio- abroad. As the curve flattened, a partial and targeted economic impact globally. The COVID-19 outbreak containment started in May 4. Finally, On June 4, has led a compounded double shock to both demand the government reopened hotels, restaurants, cafes, and supply of the economies around the world. On mosques, and some cultural activities but enhanced demand side, economic activity has been disrupted sanitary measures were kept in place. The curfew due to mandatory containment and social distancing ended on June 8 and all land, air and sea borders measures directly acting as a physical restrictions were reopened on June 20, three months after the to commerce while at the same time consumption onset of the crisis. These measures were largely has plummeted due to adjustments in the spending successfully enforced and well adhered to but some behavior as households save more due to the social tensions appeared due to economic pressures. uncertainty. On the supply side, a sizable share of the The COVID-19 containment measures have public and private sector operations have ceased and resulted in a sharp decline in economic activity. global value chains (GVCs) have been disrupted. In The economic slowdown of the productive sectors, a addition, external trade and the purchasing of goods reduction in government resources and a tense social between countries have declined due to formal border climate could lead to a negative cascade effect. Every closures and disruption of air and sea transport. 20 TUNISIA ECONOMIC MONITOR – THE COVID-19 GLOBAL PANDEMIC SHOCK Projections of the full economic impact duration of containment which are compared to a of the outbreak are based on large confidence counterfactual of the absence of COVID-19 (S0). intervals due to the rapidly changing context and The first simulated scenario (S1) assumes a more the complexities of the shock. The full scale of the benign situation in which containments are enforced COVID-19 spread itself remains undetermined and is for two months resulting in a full control of virus spread. subject to the testing capacities of each country. As The measures introduced globally and in Tunisia lead to such, the speed of spread and contagion, visibility disruption of supply chains, a sharp decline in external of the duration of total or partial containment are not demand, and a sharp reduction in human mobility fully understood and could change over time. The and tourism. In this benign scenario, heavily exposed transmission channels of the pandemic to the economy sectors15 are impacted. Other developments include a at the aggregate, business and household level are rise in unemployment, return of Tunisians living abroad multidimensional, uncertain and hard to capture fully. following job loss, a significant drop in remittances, a The broad channels of impact among the economic drop in investment and a deceleration in trade.16 agents for the case of Tunisia are schematized in The downside scenario (S2) assumes an ex- Figure 27. The other dimension of uncertainty in the tension of containment to more than two months, outlook is the size, timeliness and efficiency of future with wider spread of the virus and significantly more government interventions. Accepting these limitations, severe impacts on all sectors of the economy with a this note provides an initial assessment of the possible significant slowdown in production along with a col- economic impact of COVID-19 on Tunisia’s economy lapse in demand. In this scenario all major drivers of through scenario simulations on sectoral economic growth, employment, public finances, SOEs, tourism and the financial sector. 15 Heavily impacted sectors include textiles, mechanical and electrical industries, construction and public works, transport services, hotels and restaurants, leisure Scenarios of Impact services, trade and crafts. 16 As much as 60 percent of orders were cancelled in The analysis involves two COVID-19 alternative March, according to IACE’s “Opinion Survey of Business scenarios (Figure 28) based on the severity and Leaders March 2020”. FIGURE 27 • The COVID-19 Shock Transmits through Multiple Economic Channels Supplies External International demand tourism Environment Consumption Expenditures X Supply shock (drop in production) X Taxes Public Households X State Budget Purchasing X Domestic Oriented Export Oriented Sectors Sectors Transfers X Taxes Wages Banking Sector X Delay of payment of deadlines Source: Authors’ elaboration. SPECIAL FOCUS 21 Scenarios of COVID-19 Economic Impact in Tunisia FIGURE 28 •  2 months contaiment General containment of Resurgence of COVID-19 cases SCENARIO 1 SCENARIO 2 SCENARIO 3 more than 2 months in the last quarter Simply chain disruption Simply chain disruption Failure to find an effective and significant decline in and significant decline in treatment or vaccine external demand external demand Sharp drop in mobility of Reintroduction of health Sharp drop in mobility of people and tourism measures people and tourism Relative control of spread from June 2020 Relative control of spread from June 2020 Unstimulated possible scenario at this stage (Reassessment) Scenario 0 (baseline scenario): no COVID-19 (Re-evaluation in a few months) Source: Authors’ elaboration. economic growth significantly slow down. Notably, engineering industry, textiles, tourism and trade. investment falls as a result of global uncertainty (busi- Prior to the pandemic, economic performance was ness demographics, private and public investment, weak in all sectors. Figure 29 The most COVID-19 ex- FDI, PPPs, etc.) and private consumption falls due posed sectors can reduce overall growth significantly to a sharp precautionary drop in household demand shows that under a shorter containment period (S1), impacting the services market (20 percent of final tourism, textiles and mechanical industries are the household consumption) and goods market due to a sectors with the highest impact on growth of –1.3, –1.1 change in consumption behaviors and postponement and –0.9 pp, respectively. If the containment is more of purchase of durable goods.17 prolonged, the deterioration of the economic situation will be significantly stronger and notably mechanical GDP and Sectoral Growth and electrical industry (–1.6 percent), tourism (–1.5 percent) and textiles (–1.3 percent). In addition, trade The simulation results in both scenarios show a sig- sector would grow at a rate of–1.0 percent compared nificant impact on overall GDP growth ranging from to –-0.5 percent in S1. The agriculture, administration 2.9 percent to 5 percent contraction (Table 4). Un- and hydro sector performance are assumed to be der the counterfactual of no COVID-19 Tunisia, would positive and equal in both scenarios. be able to achieve an economic growth of 1.6 percent. However, due to containments, curfews, economic Employment growth would be expected to contract by 2.9 to 3.4 percent in Scenario 1. The situation would be markedly Based on sectoral employment elasticities the worse in Scenario 2, where the growth rate could be be- mechanical and electrical industry, construction tween –4.5 and –5 percent. As a result, the total loss in and public works, and hotel and restaurants GDP could be as much as 6.6 percentage points when would be the sectors with the highest risk of compared to the no COVID-19 (S0) baseline scenario. The sectoral breakdown of the two simu- lations is driven by a significant deterioration in 17 A deeper and more protracted COVID-19 scenario (S3) economic growth in mechanical and electrical could lead to further worse outcomes. 22 TUNISIA ECONOMIC MONITOR – THE COVID-19 GLOBAL PANDEMIC SHOCK TABLE 4 • Tunisia: Economic Growth Simulation Results S0 S1 S2 Growth (%) +1.6 –2.9 to –3.4 –4.5 to –5.0 GDP decline compared to S0 (pp) — –4.5 to –5.0 –6.1 to –6.6 Source: Authors calculations The Most COVID-19 Exposed FIGURE 29 •  Number of Jobs in Sectors Most FIGURE 30 •  Sectors Can Reduce Overall Growth Exposed to the Crisis (2019Q4) Significantly 0.50 Construction and public works 511.5 0.25 0.00 Contribution to GDP –0.25 Commerce 439.8 growth (pp) –0.50 –0.75 Hotel and restaurants 158.5 –1.00 –1.25 Transport and telecommunications 196.8 –1.50 –1.75 Textiles, clothing and shoes 234.0 2019 2020 S0 2020 S0 2020 S0 Mechanical and Electrical Industries Textile Tourism Mechanical and Electrical Industries 159.4 Transport Commerce Agriculture Administration Source: Authors’ calculations. Source: Authors calculations. Note: Numbers in thousands and include informal jobs. job losses. The sectoral employment data in the has forced quarantine of the population and the last quarter of 2019 are shown in Figure 30. The halting of production processes. During extended employment impact is based on employment intensity containments, firms have ended up ceasing of jobs and elasticities calculated over the pre-COVID production leading to pay cuts or layoffs. Tunisians period (2011–2019) based on data from employment abroad would be forced to return home. The resulting surveys (formal and informal). During this period, the unemployment is expected to worsen and incomes construction and public works sector, mechanical fall and intensify the lagging employment indicators and electrical industries, hotels and restaurants, and for women, young people and regional developing trade were the sectors with high average elasticities areas. The middle class would be also affected by ranging between 4 to 0.8 (Figure 31).18 The final the crisis which could aggravate existing social impact of job losses remains conditional on the policy inequalities and in the absence of adequate coping responses and their effectiveness in impacting the mechanisms could lead to rising social tensions. jobs elasticity. Such policies might include measures such as expanding unemployment benefits, provision of benefits for precarious (or high risk) jobs and 18 In a recent study by the International Food Policy Research Institute (IFPRI), job losses would be estimated at 143,000 amendments to dismissal regulations. for a one-month crisis and 430,000 for a three-month crisis The acute decline in growth and job in Tunisia but more significant in services and industries prospects could lead to impacts with a social sectors (IFPRI, 2020). http://ebrary.ifpri.org/utils/getfile/ dimension for the economy. The health crisis collection/p15738coll2/id/133737/filename/133947.pdf. SPECIAL FOCUS 23 Sectoral Employment Elasticities FIGURE 31 •  Government Expenditures (TND FIGURE 32 •  (2011–2019) Million) 35,000 Construction and public works 4.01 30,000 25,000 Commerce 0.75 20,000 Hotel and restaurants 1.44 15,000 10,000 Transport and telecommunications 0.41 5,000 0 Textiles, clothing and shoes 0.70 2017 2018 2019 LF 2020 Mechanical and Electrical Industries 2.43 Wage bill Subsidies Capital expenditures Good and services Source: Authors’ calculations. Source: Authors’ calculations. Public Finances FIGURE 33 • Government Revenues (TND Million) 40,000 Fiscal pressures are expected to further intensify 35,000 as a result of falling revenues while expenditures 30,000 fall only marginally. In the recent years the share of 25,000 current expenditures (wages, transfers and subsidies) 20,000 has consistently grown relative to capital expenditures 15,000 while the majority of revenue growth have been from 10,000 direct taxes (Figure 32 and Figure 33). Simulation 5,000 of the impact of the crisis on public finances and 0 2017 2018 2019 LF 2020 financing needs shows that, compared to the no COVID-19 scenario, tax revenues would decline in both Indirect Tax Direct Tax Non-Tax Revenues scenarios but public expenditure would only witness a Source: Authors’ calculations. slight decline (Figure 34). Indirect taxes are expected to fall as Value Added Tax (VAT), consumption duties and customs duties fall due to lower consumption and imports. In addition, the global decline in oil prices expenditures. The government has announced a will negatively impact non-fiscal revenues (fuel trade, range of policies to mitigate the COVID-19 impact gas pipeline royalties, a decrease in the government especially on the most vulnerable households. share of ETAP’s profits due to the drop in prices and Financing of these expenditures could be done production). As a result, the budget deficit would through savings in: widen between scenarios to reach TND 7,661 million (S1) and TND 9,211 million (S2) against TND 3,782 • Lower energy subsidies as a result of lower oil million in the Budget Law. Similarly, financing needs prices would rise and depending on the scenario reach TND • Postponement of lower priority investment 14,287 million (S1) or TND 15,837 million (S2) against • Increasing expenditure efficiency the envisioned TND 11,248 million. • Adjusting transfers and support to SOEs. Lower expenditures as a result of oil price decline and reprioritizations are expected to High wage bill and operating expenses redirect resources to health and social protection of Tunisian SOEs in a COVID-19 background 24 TUNISIA ECONOMIC MONITOR – THE COVID-19 GLOBAL PANDEMIC SHOCK FIGURE 34 • Simulation of COVID Impacts on Public Finances and Financing Needs 35 30 25 TND billion 20 15 10 5 0 –5 –10 Tax Exceptional Current Development Primary Fiscal Financing revenues revenues expenditures expenditures deficit deficit needs Revenues Expenditures Indicators S0 (LF2020) S1 S2 Source: Authors’ calculations. exacerbate existing government contingent li- SOE Wage Bill and Operating FIGURE 35 •  ability risks. As a percentage of operating expenses, Expenses Are High Relative to their Operations payroll expenses represent 9 percent for STEG, 16 percent for TUNISAIR, 20 percent for GCT, 41 per- 140% 120% 117% cent for CPG and 38 percent for SONEDE (Figure 35). 100% 107% 100% 97% However, the burden is more prevalent in terms of op- 80% erating expenses, which as a percentage of revenues 60% are high and account for 100 percent for STEG, 107 41% 38%41% 40% percent for TUNISIAIR, 97 percent for GCT, 117 per- 16% 20% 20% 9% cent for CPG and 41 percent for SONEDE. The high 0% payroll costs reflect the high number of employees STEG TUNISAIR GCT CPG SONEDE (power utility) (airline) (chemicals) (phosphates) (water) within these SOEs. Wage Bill, % of Operating expenses, Tourism and Remittances operating expenses % of revenues Source: MoF. Tourism sector receipts and remittances are projected to undergo a sharp contraction as the crisis impacts Europe and travel restrictions However, revenue losses could be partially offset are imposed. Tourism revenues steadily increased by Maghreb visitors and domestic tourism. in 2018 and 2019 driven mainly by visitors from Similarly, remittances would decrease by 21.1 Europe and Arab countries and in the absence and 18.1 percent respectively (Figure 37). This of COVID-19 were projected to reach TND 6,744 decline in remittances is expected to be particularly million. However, global travel restrictions are significant among Tunisians in Europe which can be projected to sharply decrease tourism receipts to explained by the saving behavior due to uncertain TND 3,370 million in scenario 1 and TND 2,240 circumstances, loss of job or forgone income million in scenario 2, registering a 50 percent and (in the affected sectors abroad especially for the 33.5 percent reduction, respectively (Figure 36). precarious jobs) and the return of some migrants. SPECIAL FOCUS 25 Impact on Tourism Revenues (TND FIGURE 36 •  FIGURE 37 • Impact on Remittances (TND Million) Million) 8000 8000 7000 6375 6744 7000 6000 5791 6000 5620 5030 5000 5000 4120 4141 4000 4000 3370 3000 3000 2240 2000 2000 1000 1000 0 0 2018 2019 SO S1 S2 2018 SO S1 S2 Total Europe Maghreb countries Total Europe Arab countries Source: Authors’ calculations. Source: Authors’ calculations. Banking Sector banks. Banks financial indicators have deteriorated due to postponement of repayment of bank loan deadlines The supply and demand shock in the real sector for businesses by 6 months and also a decline in could place stress on the financial and banking deposits and resources. In addition, banks’ lending sectors which could, in turn, intensify pressures resources have become partly taken up by lending to on the real sector’s recovery (Figure 38 Impact the government to support the budget to fight against scenarios for the banking sector). The health crisis the pandemic; 12 major banks have committed to and containment measures, have impacted the Tunisian lending TND 1,180 million to the government. FIGURE 38 • Impact on Remittances (TND Million) Scenario 1 Scenario 2 Crisis generally confined to the real sphere Possible expansion of the crisis Announced main measures: • Impact of economic activity’s decline on the banking sector • Refinancing pressures (drying up of liquidity and increasing needs) • Lowering the policy rate • Constraints to more bank interventions (e.g., considering NPL ratios, • Creation of new lines of credit restructuring plan of public banks) • Relaxation of conditions of liabilities • Stock market: possible transmission of banking sector difficulties to • Deferral of credit repayment the stock market • Refinancing of banks Source: Authors’ elaboration. 26 TUNISIA ECONOMIC MONITOR – THE COVID-19 GLOBAL PANDEMIC SHOCK Special Focus 2: Tunisia´s reduce social gaps. Poverty rates have declined in Infrastructure: Demonstrated urban and rural areas, and fell nationally from 25 Progress but Mounting Challenges percent in 2000 to 15 percent in 2015 (Figure 39 Share of Tunisia’s population below the poverty line). This Special Focus is based on a diagnostic of The investments have enabled reasonably Tunisia’s economic infrastructure sector (transport, good access to basic infrastructure services. electricity, water and sanitation, and information and Access to improved water supply and electricity is communication technology (ICT)) carried out by the almost universal, and the use of surface water for World Bank in collaboration with the Government human consumption has virtually disappeared. Ninety- of Tunisia. It shows that the country has invested two percent of the population has access to improved significantly in infrastructure and succeeded in sanitation. Tunisia has a dense road network of 20,000 securing reasonable access to basic services for its km and an additional 52,000 km of rural roads. It also citizens. However, service quality has consistently has eight ports, seven of which engage in international declined over the last ten years, and the country faces trade. The telecommunications network is adequate, challenges with poor SOE performance, inadequate mobile telephone access is virtually universal, and 51 revenues, declining investment and sub-optimal percent of the population has access to the internet. planning and regulation. While access rates are high, the relative Tunisia is facing mounting challenges with quality of Tunisia’s infrastructure has deteriorated increasing demand for energy, water supply, significantly over the last 10 years. According to the transport and digital services, while experiencing World Economic Forum rankings, Tunisia was ranked the negative effects of climate change. Addressing 33rd in the world in 2008 but by 2017 had dropped these challenges will require more investment but to 82nd (Figure 40). The ranking declined markedly the country is facing macro-economic and fiscal for ports and airports, and to a lesser extent, for constraints that may curtail the government’s ability electricity supply and railways. Logistics performance to finance the needs with public resources. A series and the capacity and efficiency of ports and shipping of reforms are well-known within government, infrastructure has reduced, public transport services including reducing the public wage bill, restructuring are of poor quality, electricity transport and distribution SOEs and reducing their reliance on subsidies, and losses have increased, and the water utility network is pension reform. Some areas of reform particular to suffering from increasing losses and breakdowns. In infrastructure are discussed at the end. rural areas, sanitation access is very basic and there Tunisia’s has made significant investments are notable regional disparities in terms of the quality in infrastructure over the last decades, which of access. Infrastructure providers are suffering from has contributed to economic growth. Estimates of inadequate funding and cash flow, affecting their ability capital expenditure19 over the last thirty years show to meet daily operational and maintenance costs, relative consistency, with infrastructure spending which is causing declining service levels and faster averaging 7.2 percent of GDP in the period 1985– than normal depreciation of infrastructure assets. 1990, 6.2 percent 1995–2005, and 6.4 percent 2005– SOEs dominate the infrastructure sector, 2015, although spending has fallen more recently receive considerable subsidies, but still incur (Table 5 Historical spending on infrastructure using notable financial losses. In 2016, the aggregate net international unit costs). This compares well with the loss of the 9 main infrastructure SOEs20 was TND762 average of 7 percent of GDP for emerging economies. The investments have contributed to economic growth and poverty reduction. About one-fourth of the average 19 Includes both new and renewal capex. growth of 2.1 percent observed between 2005 and 20 Société Tunisienne de l’Électricité et du Gaz (STEG), 2015 can be attributed to infrastructure, which has Société Nationale d’Exploitation et de Distribution des helped create jobs, improve competitiveness and Eaux (SONEDE), Office National de l’Assainissement SPECIAL FOCUS 27 TABLE 5 • Historical Spending on Infrastructure Using International Unit Costs New CAPEX Renewal CAPEX Total 1985–1990 1995–2000 2005–2015 1985–1990 1995–2000 2005–2015 1985–1990 1995–2000 2005–2015 Transport 0.1 0.8 0.6 4.2 2.8 2.2 4.3 3.6 2.7 ICT 0.0 0.2 0.3 0.0 0.1 0.3 0.0 0.3 0.7 Electricity 1.4 1.1 1.7 1.0 1.0 1.0 2.4 2.0 2.7 W&S 0.2 0.1 0.1 0.3 0.2 0.2 0.5 0.3 0.3 Total 1.7 2.2 2.7 5.4 4.0 3.7 7.2 6.2 6.4 Source: World Bank estimates. million (11 percent of gross revenue or 0.8 percent Share of Tunisia’s Population Below FIGURE 39 •  of GDP), which further deteriorated to TND1,420 the Poverty Line million (19 percent of gross revenue or 1.5 percent 40 39 of GDP) in 2017 (Figure 41). There is a constant need 36 for state subsidies to cover operating costs, which in 26 25 23 2017 were estimated at TND 896 million, and at TND 21 17 15 22 billion over the 9-year period 2009–17. Operating 13 15 10 revenues of the nine SOEs grew by 41 percent over this period, while operating expenses grew by over Rural Urban Average 80 percent.21 More importantly, operating expenses have increased at a much faster rate than output 2000 2005 2010 2015 from production (e.g., passenger and freight volumes Source: INS. were approximately the same between 2009 and 2017 but operating costs increased by 64 percent); water volumes sold increased by 18 percent while costs increased by 57 percent, while cumulative reuse is underpriced. Fares for passenger rail and inflation was 40 percent. The infrastructure SOEs had freight are below cost-recovery, and highway tolls are accumulated debts of TND 9.5 billion by 2016, which underpriced. Tariffs are set by ministerial councils, increased to TND 12.8 billion in 2017 (13 percent of which creates a reliance on state resources and a GDP). Their ratio of debt to own funds is very high at loss of independence. Overall, it is estimated that the 2.3x overall, with external debt financing two-thirds of government pays for 45 percent of the infrastructure fixed assets at the end of 2016. bill, while 50 percent is paid for by user fees and 5 Real tariffs have declined and are inadequate percent through external financing.22 in most sub-sectors, resulting in low cost-recovery levels and reliance on government subsidies. Low tariffs with only small nominal increases in some (ONAS), Société Nationale des Chemins de Fer sectors have increased the operational losses of Tunisiens (SNCFT), TransTu – public transport and SOEs. Considerable subsidies are now needed to light rail, Office de la Marine Marchande et des Ports (OMMP), Office de l’Aviation Civile et des Aéroports cover operating expenditures, including wages and (OACA), Tunis Air and Tunisie Telecom. fuel costs. In the water sector, tariffs are estimated to 21 Based on assumptions from available SOE financial cover only 67 percent of operating expenditure, while statements—years vary by data availability. the operating cost recovery for irrigation services is 22 Estimates from World Bank Public Expenditure Review, estimated at 60 percent, and treated wastewater for 2019. 28 TUNISIA ECONOMIC MONITOR – THE COVID-19 GLOBAL PANDEMIC SHOCK Tunisia’s Infrastructure FIGURE 40 •  Net Income of Main Infrastructure FIGURE 41 •  Competitiveness Global Ranking SOEs in 2017 after Operating (among 137 Countries) Subsidies (TND Millions) 0 20 44 OMMP 40 25 OACA 60 3 ONAS 80 –39 SONEDE 100 120 –81 SNCFT 140 –132 Transtu 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 –140 Tunis Air Score global Ports Chemins de fer Electriicité –1194 STEG Source: Authors’ calculations. Source: Authors’ calculations. The SOE governance framework and public 2 percent of power generated since the plan’s in- procurement are sources of inefficiency. The gov- ception in 2010, although the recent advances with erning law on SOEs focuses mainly on restructuring, the Tataouine solar project will change this (see privatization, and liquidation of SOEs, and there are below). Planned investments in water production few provisions on governance. SOE boards are com- and transfer projects have been stalled by lack of posed entirely of government representatives, which funding, and there are notable lapses in the contrats can affect objectivity. The situation of SOE reporting programmes. The contractual terms between the is mixed with several SOEs publishing their financial state and SOEs are often not met and several SOEs data online, although there is room to improve the have been operating without a contrat programme. quality and consistency of reporting. There are sev- The uncertainty makes infrastructure planning and eral weaknesses in public procurement, including a budgeting difficult and deters private investment. It need to enhance skills and support the decentraliza- also implies an absence of sector regulation and a tion and training of public purchasers.23 Recent ob- consequent lack of accountability. Four SOEs have servations suggest that prior control mechanisms are moved to contrats de performance, including STEG inefficient, and that reviewers often lack knowledge (2017–20). These aim to improve accountability; of project management to make effective decisions. however, several indicators under STEG’s contract Procurement control systems rely more on compli- are not being met, particularly those related to com- ance than on trying to achieve value for money in mercial performance. The contract contains ambi- public procurement. tious investment targets but lacks details on how The implementation of national infrastruc- these will be financed. ture development plans is weak and there are Private sector participation in infrastructure lapses in planning and regulation. Most infra- and financing of investments has been limited but structure sectors have five-year national plans to there are a few examples of successful public- guide investment, which respond to real challenges private partnerships (PPPs), in the energy and faced by Tunisia and call for increased renewable transport sectors. Since 1990, nine PPPs worth energy, water security, improvement of the road net- $4.5 billion have reached financial close. These work and a new airport for Tunis. However, action has been notably weaker. In spite of the Tunisian Solar Plan target of achieving 30 percent renewable 23 Organization for Economic Co-operation and energy by 2030, renewables continue to contribute Development (OECD). SPECIAL FOCUS 29 include the Radès II combined-cycle power plant in increase cost recovery, while mobilizing the private 1999 and the upgrade and operation of the airport sector to improve efficiency, and where feasible, at Monastir and a new airport at Enfidha more to reduce the reliance on government resources. recently. The government is developing 1,000 MW Social and political risks would need to be managed, of renewable energy projects under a concession including having adequate safety nets for the poor scheme; 500 MW of solar projects have been bid out and vulnerable. A series of reforms are well-known and another 500 MW of wind projects are expected within government, including reducing the public to be bid out in 2020. Nevertheless, Tunisia has been wage bill, restructuring SOEs and reducing their behind its peers in leveraging private investment in reliance on subsidies, and pension reform. Some infrastructure, with Morocco, Algeria and Jordan all areas of reform particular to infrastructure are having done considerably more. Several attempts at presented below. PPPs in energy, desalination and wastewater have not succeeded. Infrastructure SOE’s have insufficient 1. Improving the use of planning and equity, large fixed assets, consistent operating losses performance management instruments. In and rely on subsidies, while the domestic banking the Tunisian context where SOEs develop and sector has been reluctant to finance projects because operate most of the country’s infrastructure, of a lack of liquidity and the absence of a bankable the contrats programmes and contrats de project pipeline. performance can be effective instruments of Economically, Tunisia is going through a planning and regulation, provided expectations difficult period. Fiscal performance has deteriorated are realistic and obligations on both sides markedly over the past decade. The state has are established and monitored throughout contingent liabilities from guarantees issued to the contract period. For example, including support SOE external borrowing in foreign currency, preliminary financing and the expected which amounted to 14 percent of GDP in 2016. This contribution from public and private sources, has raised the country’s risk profile and resulted in a and indicating if projects are to be implemented series of sovereign credit rating downgrades (see the as PPPs or by the public sector, would contribute recent economic outlook section). to improved investment and financial planning. At the same time, demand for infrastructure Monitoring could be improved through periodic continues to grow across all sectors, putting pres- reviews and updates to reflect market reality, and sure on existing assets. Due to population growth, to evaluate the performance of both the SOE and urbanization and underpricing of services through the government against contract targets and subsidies, the growth in demand for infrastructure ser- obligations. vices is strong. Peak energy demand is expected to 2. Improving the operational and financial grow annually by 5 percent. Water scarcity is increas- sustainability of SOEs while ensuring ing, exacerbated by climate change, with adverse im- social protection. Inadequate funding has pacts on service delivery if supply- and demand- side resulted in declining operational performance measures are not taken. The per capita availability of of infrastructure providers, which have renewable freshwater resources was at 410 m3 per gone through a vicious cycle of worsening inhabitant in 2014, below the absolute water security performance (Figure 42). Turnaround threshold of 500 m3. strategies can improve performance through a series of consistent actions, which include Reforms to Boost Return on Investments establishing a baseline, cleaning up finances, setting clearly defined objectives and targets, Moving forward, one of the main tasks will be updating management information systems, for Tunisia to undertake reforms to improve the and improving human resources. A review of governance of SOEs, investment planning, and tariff adequacy in each sector and the balance 30 TUNISIA ECONOMIC MONITOR – THE COVID-19 GLOBAL PANDEMIC SHOCK FIGURE 42 • Vicious Cycle of Declining Utility Performance 1. Low tariffs, driven by political motives, give rise to financing gaps to be met by public funds 7. More capital 2. Public funds expenditure needed to are insufficient restore system and poorly timed efficiency Utility vicious cycle trend driven by low tariffs 6. Poor technical 3. Maintenance is performance drives neglected poor financial performance 5. Customers are not 4. Operators technical incentivized to pay for performance worsens poor quality of services Source: Authors’ elaboration. between tariffs, domestic tax revenues, and Implementing these measures and adopting a transfers from external sources is crucial to new legal framework, and in particular the revision improve the efficiency of sector financing and of the Investment Law no. 89-9 as recommended reduce the reliance on subsidies. Better targeting in the Livre Blanc, would allow SOEs to become of subsidies, through cash transfers schemes, more financially autonomous and improve for example, can ensure basic services for the transparency. Secondly, procurement systems poor and vulnerable at affordable prices, while could be strengthened through the use of passing on costs to other social classes at more performance-based mechanisms to improve cost-reflective prices. value for money in public procurement, flexibility 3. Improving the corporate governance of SOEs to respond to PPPs while ensuring value for the and strengthening procurement systems. state, and skills development and training for Tunisia’s Livre Blanc of March 2018 focuses procurement professionals. recommendations in four key areas related to 4. Increasing private participation in SOEs governance and financial restructuring. infrastructure. Tunisia has already moved SPECIAL FOCUS 31 towards creating an enabling environment for building consensus for PPPs amongst public PPPs through the PPP Law of 2015, the subsequent sector stakeholders, and prioritizing the most investment code and a PPP conference in 2018. commercially viable projects and / or those where Progress with the launch of projects for financing, the technical strengths of the private sector will lead construction and operations, or managerial to efficiency gains would increase the chances of interventions for financial and efficiency gains success for PPPs. Possible sub-sectors include would create an important demonstration effect. renewables, thermal generation, desalination and Having a robust and bankable project pipeline, wastewater reuse, ports, and airports. 32 TUNISIA ECONOMIC MONITOR – THE COVID-19 GLOBAL PANDEMIC SHOCK ANNEX – SELECTED ECONOMIC INDICATORS TABLE A.1 • Tunisia: Selected Economic Indicators (2017–2023) 2019 2020 2021 2022 2023 2017 2018 (Prel.) (Proj.) (Proj.) (Proj.) (Proj.) Real Sector and Prices Real GDP growth (% change) 2.0 2.7 1.0 –4.0 4.2 2.2 2.7 Gross investment (% of GDP) 19.3 18.5 19.2 14.0 14.2 16.0 16.9 Gross national savings (% of GDP) 5.6 7.4 10.3 6.8 7.1 9.2 10.2 Inflation (GDP deflator, % change)) 5.2 6.5 6.7 4.9 5.5 3.3 4.7 Government finance (% of GDP) Total revenues (including grants) 24.3 26.1 28.0 26.4 25.5 26.2 26.6 Total expenditure and net lending 30.5 30.5 31.9 30.4 29.2 28.9 29.3 Overall balance (excluding grants, confiscated –6.1 –4.6 –4.1 –5.0 –4.0 –3.0 –2.9 assets and privatization receipts) Public debt ratio 70.2 78.0 72.2 83.1 82.8 82.3 79.8 Selected monetary accounts (annual percentage change, unless otherwise indicated) Money and quasi-money (M2) 11.6 6.9 8.4 4.8 6.5 7.5 9.1 Credit to the economy 9.4 8.4 3.5 5.3 5.4 5.8 6.2 Policy interest rate (%, eop) 5.00 6.75 7.75 — — — — Balance of payments (percent of GDP, unless otherwise indicated) Current account balance –10.2 –11.1 –8.8 –7.2 –7.0 –6.8 –6.7 Trade balance –13.3 –14.9 –13.9 –10.3 –11.0 –13.2 –13.9 Exports of goods 35.7 38.8 38.7 31.9 37.3 39.6 40.5 Imports of goods 49.1 53.7 52.6 42.2 48.2 52.8 54.5 Foreign Direct Investment 2.0 2.5 2.1 0.5 1.7 2.3 2.5 Gross reserves (US$ billion, eop) 5.6 5.2 7.4 6.3 6.3 7.0 7.6 in months of next year’s GNFS imports 1/ 3.0 2.6 4.9 3.8 3.4 3.4 3.4 External debt 57.0 89.4 92.5 98.0 101.6 101.1 96.2 Exchange rate, average (TND/US$) 2.42 2.65 2.93 — — — — Memorandum items Population (million) 11.5 11.7 11.8 11.9 12.0 12.1 12.2 Nominal GDP (TND million) 96,325 105,597 113,732 114,534 125,907 132,925 142,890 Nominal GDP (US$ billion) 39.8 39.9 38.8 — — — — GDP per capita (current US$) 3,452 3,452 3,308 3,100 2,994 3,022 3,175 Exchange rate, average (TND/US$) 2.42 2.65 2.93 — — — — Unemployment rate (% of active population) 15.3 15.4 14.9 — — — — Source: Tunisian Authorities, IMF estimates and World Bank staff projections. 1 End-of-year reserves over next year’s goods and non-factor services imports. 33 Tunisia: Key Fiscal Indicators (2017–2023) TABLE A.2 •  2019 2020 2021 2022 2023 2017 2018 (Prel.) (Proj.) (Proj.) (Proj.) (Proj.) (% percent of GDP) Overall balance (excluding grants, confiscated assets and privatization –6.1 –4.6 –4.1 –5.0 –4.0 –3.0 –2.9 receipts) Primary balance –3.4 –1.9 –1.3 –1.9 –0.7 –0.3 –0.1 Total revenue (excluding grants) 24.3 26.1 28.0 26.4 25.5 26.2 26.6 Tax revenues 24.3 24.0 25.4 23.2 22.5 23.2 23.8 Direct taxes 8.9 8.6 11.1 10.5 9.1 9.3 9.8 Indirect taxes 13.1 15.4 14.3 12.7 13.4 13.9 14.0 Non-tax revenues 2.3 1.9 2.4 2.2 2.8 2.7 2.6 Capital income 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Grants 0.2 0.2 0.2 1.0 0.3 0.2 0.2 Total expenditures and net lending 30.5 30.5 31.9 30.4 29.2 28.9 29.3 Current expenditures 25.0 24.9 26.6 27.4 26.2 25.3 24.8 Wages and salaries 14.9 14.1 14.7 16.5 15.4 14.9 14.6 Goods and services 1.6 1.1 1.5 1.3 1.3 2.0 2.0 Interest payments 2.7 2.7 2.8 3.1 3.2 2.7 2.8 Transfers and subsidies 6.1 7.0 7.6 6.6 6.2 5.7 5.4 Subsidies 3.6 4.6 4.8 2.7 2.7 2.2 2.1 Transfers 2.5 2.3 2.9 3.9 3.5 3.5 3.3 Non allocated (incl. COVID-19 measures) 0.0 0.0 0.0 0.5 0.0 0.0 0.0 Capital expenditures and net lending 5.5 5.6 5.3 2.9 3.1 3.6 4.5 Overall balance (excluding grants, confiscated assets and privatization –6.1 –4.6 –4.1 –5.0 –4.0 –3.0 –2.9 receipts) General government financing 6.1 4.8 4.1 5.0 4.0 3.0 2.9 Grants, privatization receipts and sales of confiscated assets 0.3 0.4 1.0 1.1 0.3 0.2 0.2 External (net) 4.8 3.6 1.8 0.8 2.2 2.4 1.8 Domestic (net) 1.1 0.8 1.3 3.1 1.5 0.3 0.8 Sources: Tunisian Authorities and World Bank staff estimates and projections. 34 TUNISIA ECONOMIC MONITOR – THE COVID-19 GLOBAL PANDEMIC SHOCK 1818 H Street, NW Washington, DC 20433