• The macroeconomic situation is particularly precarious. GDP contracted by an estimated 1.5 per cent and unemployment jumped to over 18 per cent in 2011, amid rising twin fiscal and current account deficits.
  • The outlook for the economy hinges on the political transition and the external environment. Recent political developments have had adverse effects on confidence, and the eurozone’s persistent weakness continues to weigh on growth.
  • Despite earlier reforms, a level playing field has not been established in many sectors, and steps to improve the business environment have not yet been taken. Unemployment has continued to rise over the past year, driven by excessive labour market regulations and a significant mismatch of skills.


  • Addressing the systemic risks in the financial sector should be a top priority. Major balance sheet restructuring is needed as non-performing loans (NPLs) continue to rise. The poor state of the banking sector limits small and medium-sized enterprises’ (SMEs) access to credit and the broader capital market is underdeveloped.
  • The infrastructure and transport sectors lack investment and require regulatory reforms. A strategy is needed to disentangle operational and regulatory responsibilities in order to attract private capital into these sectors. Developing transparent PPP solutions to attract private sector participation will be important for structural policy as well as fiscal sustainability reasons.
  • Tunisia’s most pressing economic issue is its persistently high level of unemployment, especially among the educated youth and women. Excessive labour market regulations and a significant mismatch of skills are some of the core issues in need of attention. Shifting towards a more inclusive growth model could also help reduce the stubbornly high and rising unemployment rate.


The economy continues to face substantial challenges, brought about by weak external conditions and an increasingly uncertain domestic political environment. The economy contracted by 1.5 per cent in 2011, despite a slight recovery following the Arab uprising and a boost associated with the end of the Libya conflict. Tourism revenues fell by 33 per cent in 2011, along with a fall by 26 per cent of FDI. The economy registered a sharp slow-down in the second quarter of 2012, with GDP growth of 2.7 per cent year-on-year, owing to slumping manufacturing and industrial activities. On the positive side, agriculture and the services sectors remained resilient.  In particular, tourism has continued to recover, posting its second consecutive year-on-year growth in five quarters. The economy is expected to grow only moderately in 2012, due to overall weakness in both domestic and foreign demand, and this will delay reducing the country’s high unemployment, which jumped to 18.9 per cent in 2011, up from 13 per cent in 2010.

The external position weakened markedly. The current account deficit widened to 7.4 per cent of GDP in 2011 as tourism receipts fell by 33 per cent and foreign direct investment inflows declined by 26 per cent.  The increase in the current account deficit continued in the first half of 2012, on the back of faltering exports and a high energy import bill.  On the capital account side, FDI inflows have started to recover, but remain low by historical standards.  Despite robust international financial support, Tunisia has not managed to fully fund its external financing gap.  As a result, gross central bank reserves declined to a critical level of US$ 6.9 billion in August 2012 (equivalent to just 2.5 months of imports) from US$ 9.5 billion at end-2010. 

The fiscal deficit deteriorated throughout the year It widened to 3.8 per cent of GDP 2011 from 1.1 per cent in 2010 due to increases in wages and subsidies, especially for energy. This has led to funding pressures and limits room for further fiscal stimulus. Estimates for Tunisia's financing needs in 2012 range from US$ 5 billion to US$ 6 billion. So far, the government has been able to tap into both domestic and foreign sources to fund the fiscal deficit. In 2011, the country received US$ 1.3 billion (including two US$ 500 million budget support loans from AfDB and World Bank), in addition to a US$ 500 million loan from Qatar in April 2012. In July 2012 Tunisia issued a seven-year, US$ 485 million US government‑guaranteed bond at 1.69 per cent, marking the country’s entry back into capital markets for the first time since 2007.

The most pronounced threat to the economy stems from an uncertain political transition coupled with the rising twin deficits. There is a risk that the current political set-up, which rests on a fragile coalition of three parties, could begin to unravel if differences remain acute. These differences have already led to the dismissal of the central bank governor and the resignation of the finance minister, which have had adverse impacts on markets: in July 2012, Moody’s downgraded Tunisia’s sovereign debt rating to Baa3 reflecting these developments. 


A number of structural reforms are needed to complement those that were undertaken in the first half of the last decade. Coupled with prudent macroeconomic policies, earlier reforms brought about higher growth rates and a more diversified economy, but failed to generate sufficient jobs to resolve the structurally high unemployment rates, especially among the youth and the educated. In addition, the privatisation agenda remains incomplete, especially in the financial sector, where around a third of banking assets are under majority state ownership. In this regard, the Government Action Plan for 2012 includes a commitment by the government to divest some of its assets. Reforms are needed to close the gap between the liberalised, FDI-attracting, export-oriented “offshore” economy and a backward “onshore” economy with no similar tax incentives and continued government intervention. More generally, improvements to the business environment can be achieved by narrowing the gap that exists between de jure institutional frameworks and their implementation and effectiveness. 

A number of reforms need to be enacted in the financial sector, which is plagued by solvency and liquidity issues. High non-performing loans (NPLs) indicate a weak balance particularly in the state-owned banks that have been involved in directed lending to connected business and over-exposed to a few sectors. Major restructuring of these banks is needed. These banking system weaknesses have partly crowded out lending to SMEs. Strengthening the supporting institutional framework for lending to SMEs will be required to enhance their access to finance. Information on borrowers is limited and there are major information gaps in the existing credit registry, especially with regards to the smaller loans. There is no unified collateral agency, and contract enforcement is currently a lengthy and costly process.

Additional reforms are needed in the power and energy sectors. Although there have been efforts to encourage private sector participation in power generation, it still only accounts for around a fifth of total generation. The power sector in Tunisia is dominated by the state with natural monopoly elements, especially in transmission and distribution. While account unbundling has taken place within the main state-owned company, further steps are still needed in the form of legal, management, and ownership separation. On the regulatory side, current laws need to be supplemented by additional reforms to address the lack of an independent energy regulator and the single buyer wholesale model that is non-conducive to competition and heavy subsidies for both fuel and financing. Lastly, support schemes to promote the implementation of sustainable energy measures have been introduced through direct financial incentives and tax incentives.

Reforms in infrastructure, especially in the municipal and transport sectors, have had mixed success, and there is only limited decentralisation and decision-making at the local level. Further unbundling, tariff reform, and regulatory independence are key reform challenges. Laws have not yet been developed to ensure the separation of regulatory and operational responsibility of municipalities, negatively affecting the efficiency of water and wastewater services as well as urban transport management. In a sector with an ineffective tariff system, in which service fees cover only half the operating costs, and a high dependence on subsidies, developing transparent public-private partnership (PPP) solutions to attract private sector participation is an important pillar of structural reform policy. In this regard, the legal framework based on the Concessions Law is adequate for PPP formulations, but does not provide a formal platform for private sector engagement, and the more specific PPP Law currently being drafted could contribute to lower negotiation times and greater cost effectiveness. This can be modelled after the success of the Digitial Economy Initiative, in which a PPP framework was established to channel digital economy-related PPP projects regarding the upgrade of the country’s ICT sector.


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Annual Report 2012
pdf English
pdf French
pdf German
pdf Russian

Financial Report 2012
pdf English
pdf French
pdf German
pdf Russian

pdf Donor Report 2013

pdf Sustainability Report 2012