Tunisia's Economic Growth: A Reality Check
Mid-Year Assessment of the 2024 Budget Law Projections
As we revisit the hypotheses of the 2024 budget law, we note that the expected economic growth rate was 2.1% for this year. At one point, the former head of government had mentioned the possibility of reaching 3%. Mathematically, it's possible. Now that we're halfway through the exercise, we can seriously evaluate the possibilities of achieving the projections.
The Tunisian economy has shown a growth rate of 0.6% since the beginning of the year. To reach the 2.1% target, we need to end the year with a GDP (2015 prices) of 96,728,465 MTND. This means we require a growth rate of 3.6% in the second half of the year to meet the budget law projections. As for Ahmed Hachani's 3% target, we would need 5.4% growth to achieve it.
We believe these figures are unrealistic. There is no growth engine working at full capacity, or even close to it. We must remain logical and focus on finding medium- and long-term solutions to restart the country's growth. The current numbers only confirm the recent estimates by S&P, which predicted a 1% GDP growth for both 2024 and 2025. This is a more realistic outlook.
This inability to restart growth puts pressure on all fronts. All economic indicators based on GDP will improve at a much slower rate than expected. As a result, we will continue to have a high proportion of wage mass, debt, and tax pressure, which will weigh on our next sovereign rating update. This explains the disconnect between the rating and the economy's resilience. The latter is, in fact, being held back by choices that block growth. When the calendar of external debts forces the Treasury and Central Bank to closely monitor the country's foreign exchange reserves to ensure sufficient funds to honor their commitments, the result can only be a weaker performance from sectors that consume imported goods and materials.
The choice seems to have been made: to prevent risks while keeping the machine running, even at a slow pace. In truth, this choice is good, as the cost of default is unbearable. However, there are areas where progress can be made. Allowing private operators to act doesn't cost anything except for decisions. The state cannot ensure, at the current rate, a growth rate above 3% in the medium term, except for non-recurring elements. It's time to inject a dose of liberalism, which will give the central administration more room to play its social role. The era of wearing two hats is over.
