World Bank Report Highlights Tunisia's Economic Challenges
The World Bank has recently published its "Macro Poverty Outlook" report, which analyzes and projects data for each developing country.
Economic Prospects Remain Difficult and Uncertain
According to the report, Tunisia's economic prospects remain difficult and uncertain. In the context of persistent drought and low demand, economic growth and job creation have stagnated in 2024.
Slow Implementation of Reforms
The implementation of reforms is slow, while the country faces economic difficulties. As mentioned earlier, growth and private job creation have stagnated since the 2011 revolution, pushing the state to intervene as a last resort employer and price stabilizer through subsidies.
Exacerbated Vulnerabilities
The COVID-19 pandemic, inflation, and current drought have exacerbated these long-standing vulnerabilities.
Increased Reliance on Domestic Borrowing
Although the current account has recently improved, authorities have increasingly resorted to domestic borrowing to finance the budget in recent years, including financing from the Central Bank in 2020 and 2024.
Modest and Volatile Growth
Due to the drought, uncertain external financing conditions, low internal and external demand, and the slow pace of economic reforms, Tunisia's growth has been modest and volatile since the strong contraction linked to COVID-19 in 2020 (-8.6%). After a moderate rebound in 2021 (4.3%) and 2022 (2.7%), the economy stagnated in 2023 (0% growth) and struggled to gain momentum in the first half of 2024 (+0.6% on an annual basis).
Inflation Trends
Inflationist trends: a decline at both national and international levels. Inflation has continued to moderate since the February 2023 peaks (10.4%), decreasing to 6.7% in August 2024 (compared to 7% in July). This decline seems to be due to both lower global prices and low internal demand. However, although the economy is operating below its potential, supply-side issues continue to keep inflation above the pre-COVID average (5.3%), while food inflation is higher (9.4%), posing a particular challenge for low-income households.
Unemployment and Labor Force Participation
With the current economic growth rate, the unemployment rate has increased to 16% in the second quarter of 2024, compared to 15.6% a year earlier, while the labor force participation rate has also decreased, remaining 1.5 percentage points below the pre-COVID rate, suggesting a higher number of discouraged workers.
