World Bank Anticipates Moderate Economic Rebound for Tunisia in 2024-2025
After Tunisia's economic slowdown in 2023, the World Bank predicts a "moderate rebound" for the years 2024-2025, according to its Spring 2024 Economic Outlook report, titled "Renewed Energy for the Economy."
This outlook is based on the assumption of an alleviation of the current drought conditions and a slightly more favorable financing environment. As a result, economic growth is expected to reach 2.4% in 2024 and 2.3% in 2025-2026. If these forecasts materialize, "Tunisia's real GDP would recover to its pre-COVID-19 pandemic level."
The World Bank explains that this modest growth is set against a backdrop of persistent challenges, including water scarcity, uncertainty surrounding borrowing, and a reform dynamic that is struggling to gain momentum. Therefore, "growth forecasts for 2024-2026 are subject to significant downside risks," the Bank warns.
Indeed, without decisive budgetary reforms and measures to promote competition, or if available financing proves insufficient to cover external needs, Tunisia may face even lower growth projections. These challenges include ensuring sufficient foreign exchange in the economy, which is essential to avoid pressures on exchange rates and prices, with negative repercussions on economic activity and employment.
Furthermore, if drought conditions persist, it would be necessary to revise growth projections downward, considering the negative impact on agriculture and the trade balance. Tunisia's public finances and external account would remain precarious without adequate external financing. The budget deficit, although decreasing slightly, is expected to reach 6.1% of GDP in 2024, mainly due to a decrease in subsidies and real wage bills, as well as a moderate increase in tax revenues.
In parallel, the current account deficit is expected to remain at 2.4% of GDP in 2024, supported by continued growth in exports, particularly in the tourism sector, and stable terms of trade. However, gross financing needs are expected to increase, reaching 16.1% of GDP in 2024, mainly due to a significant external debt service. Nearly two-thirds of the required financing would need to be allocated to debt amortization, which would exacerbate Tunisia's dependence on external financing sources.
