Economic growth is projected to rebound in 2017 and 2018, spurred by rising business and consumer confidence and by the implementation of the investment law which will improve the business environment. Economic activity will strengthen, in particular in the tourism and phosphate sectors, and boost job creation. However, unemployment will remain high, especially in the poor and remote regions and for the young higher educated graduates. Inflation will increase, driven by the hike in wages and the depreciation of the dinar. The current account deficit will narrow gradually as higher commodity prices will partly offset rising services and current transfer revenue.
Monetary policy should be tightened gradually to contain inflationary pressures. The fiscal deficit has reached 6% of GDP in 2016 and should be reduced by containing the wage bill in the public sector and better targeting social programmes. This would allow the execution and implementation of public investment projects, particularly in infrastructure, to continue. Reforms in product markets and in competition would boost private investment and productivity.
Tunisia is well integrated in some global value chains (GVCs), but exports are not diversified. Despite the dynamism of the exporting firms benefiting from the “offshore regime”, regulations in the domestic market hinder job creation. To ensure that trade benefits even remote regions, Tunisia needs to develop road and port infrastructure, reduce regulatory barriers to trade in services and continue trade facilitation efforts, such as reducing border procedures.