Professor of International Finance at the University of Tunis, which is FEMISE member, expert and international consultant Sami Mouley analyses the short- and medium-term impacts of the Tunisian revolution on the country’s economy. The road to democracy won’t be smooth…
Econostrum: What is the risk that the macroeconomic situation will deteriorate?
Samy Mouley: Tunisia relies on the revenues it receives from tourism and foreign investment. The combination of fewer tourists, a slow macroeconomic cycle and sluggish exports in the offshore sector is making the country very fragile. Gross domestic product (GDP) growth is expected to be at least 3.7 percentage points lower than the forecast rate, at constant prices, and will reach a maximum of 1.6 % by the end of 2011.
The political crisis revealed a kind of capitalism based on cronyism linked to a system of privileges, showing the underside of the competition that the authorities want. This explains the paradox of a dynamic growth rate that is incapable of curbing unemployment, which currently stands at over 30% among young university graduates.
Public debt is due to increase, reaching more than 49% of GDP, compared with a forecast 42.3%. Foreign debt also remains quite high, having already stood at over 48% of GDP before the revolution of 14 January 2011. Our estimates show that the figure will climb to over 56% of GDP, whereas prior to the crisis the projection for 2011 was 43.8%.
E: Is it possible to get an overview of how public spending and foreign-exchange reserves are being managed?
SM: The planned budget stimulus will increase the budget deficit to more than 3% of GDP, creating an estimated additional deficit of €730m.
The €232m mobilised as part of the allocation of SDRs (*) supplied by the International Monetary Fund has been wiped off the country’s debt, giving rise to an estimated additional net deficit of around €498m. It is perhaps in this area that the country could ask for a financial package from a crisis management fund backed by a multilateral partnership or specifically by the Union for the Mediterranean.
E: How would you describe the country’s business climate and attractiveness?
SM: The obvious difficulties of the country’s business climate and the reduced attractiveness of our economy have turned out to be the ‘hidden’ negative aspects of the Tunisian ‘miracle’. The political crisis in Tunisia has finally revealed the widespread flaws in the country’s business practices, as well as in its economic and institutional governance.
Tunisia’s low level of attractiveness is due to the slow pace of reform in areas such as the liberalisation of services markets and the fairly poor quality of the country’s institutions, as proven by the corruption perceptions index.
A number of obstacles still exist, such as mediocre regulation (price controls, restrictions on foreign trade and business development) and accountability, increasing difficulty in gaining access to bank financing, poor protection for investors, the important role played by the informal economy and parallel trade, the red tape involved in signing contracts, and a lack of flexibility in the labour market, to name a few.
(*) Special Drawing Rights
Interview by Nathalie Bureau du Colombier, Econostrum. More articles of the “Grand Angle” can be found at the following address:www.econostrum.info. Registration for the Econostrum newsletter is available here:http://www.econostrum.info/subscription/