Tunisia is projected to have the lowest economic growth in the southern Mediterranean, with EBRD estimating growth rates of 1.8% for 2025 and 2.2% for 2026. Inflation reached 16% in 2024, with a fiscal deficit of 6.3% of GDP. The government has rejected an IMF loan proposal and opted for domestic loans amid soaring foreign debt, leading to concerns about economic management.
Tunisia’s economy continues to struggle, significantly impacted by President Kais Saied’s consolidation of power. The European Bank for Reconstruction and Development (EBRD) has indicated that Tunisia is projected to exhibit the weakest growth in the southern Mediterranean region, with anticipated rates of only 1.8% in 2025 and 2.2% in 2026. In contrast, the southern Mediterranean region overall is expected to achieve growth rates of 3.7% in 2024, improving to 4.1% by 2026.
Macroeconomic indicators for Tunisia are concerning, with inflation soaring to 16% in the latter half of 2024. Additionally, the fiscal deficit is projected to reach 6.3% of GDP this year, with public payroll costs constituting 13.3% of GDP. These figures reflect a troubling economic landscape that continues to deepen.
Tunisia recently rejected a $1.9 billion IMF loan proposal that sought to implement subsidy reforms and civil service restructuring. In response, the government has turned to domestic loans as foreign debt has surged to 82.2% of GDP. President Saied has extended his control over the central bank, pushing for legislative changes that would permit the bank to lend directly to the treasury, raising concerns reminiscent of Algeria’s monetary policies that have devalued their currency.
Currently, Tunisia’s foreign exchange reserves are stable at 25 billion dinars (approximately $7.6 billion), which equates to 3.5 months’ worth of imports. Despite this reserve stability, the economic outlook remains grim as the government navigates a challenging financial environment.
In conclusion, Tunisia faces the most challenging economic prospects within the southern Mediterranean region, a situation exacerbated by political developments and rising economic instability. With low growth predictions and rising inflation, the government’s recent policies raise concerns about the sustainability of Tunisia’s finances and its ability to manage its public debt effectively. Effective reforms and international cooperation will be critical for any future economic recovery.
Original Source: northafricapost.com
