Population 10.766 million
GDP 44.701 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
3.5 |
-2.2 |
2.2 |
3 |
|
Inflation (yearly average) (%)
|
4.4 |
3.5 |
5.5 |
5 |
|
Budget balance (% GDP)
|
-2.9 |
-3.5 |
-7 |
-6 |
|
Current account balance (% GDP)
|
-4.7 |
-7.5 |
-9 |
-8.5 |
|
Public debt (% GDP)
|
43.5 |
49 |
52 |
54 |
| (e) Estimate (f) Forecast | ||||
STRENGHTS
- Natural resources (gas, phosphates), agricultural resources and tourism
- Relatively diversified economy and fairly skilled labour force
- Proximity to European market and association agreement with the EU
- Gradual upgrading of infrastructures, industry and financial sector
WEAKNESSES
- Great social and geographic inequalities
- High unemployment, mainly among the young and especially university graduates
- Economic importance of agriculture
- Tourism sector facing increased competition and political uncertainties
- Significant fault lines dividing society between Islamists and secularists, as well as between tradition and modernity
- Scale of informal economy and business climate in need of improvement
Risk assessment
Heightened political tensions, with ongoing social and economic challenges
The October 2011 elections to the Constituent Assembly have led to a relative majority in favour of the Islamist Conservative Ennahda party. A coalition was formed with two secular parties and a power sharing agreement was passed at the end of 2011. The presidency of the Republic fell to Moncef Marzouki, of the Congress for the Republic and that of the Assembly to Mustapha ben Jafaar, of Ettakatol, while the post of Prime Minister went to the General Secretary of Ennahda, Hamadi Jebali, whose party holds the majority of portfolios. Nonetheless, after the assassination of a secular opposition politician leader at the beginning of February 2013, Ali Larayedh, from Ennahda, formed in March a new transition government still dominated by conservative Islamists despite the allocation of four sovereign ministries to independents.
These events will delay drafting of the future constitution and the holding of legislative and presidential elections, which look as if they will be postponed from June until the end of 2013. Moreover, the new government will find it just as difficult as its predecessor to implement an economic programme that is liberal in orientation. So the government will continue to face a large number of social and economic challenges, as well as popular demands for progress. Major issues continue to be job creation and better social and geographic distribution of growth, with development of the interior of the country neglected relative to the coastal regions.
Moderate growth expected in 2013
Subject to normalisation of the political situation, which is persistently being deferred, moderate GDP growth is expected in 2013, buoyed by household consumption and investment, both stimulated by a loose fiscal policy. Furthermore, the Libyan economy reconstruction may offer an outlet for the transport and construction sectors, in particular. However, economic activity will be curbed by a difficult global economic environment, especially in the main European partner countries (France and Italy). It could also be hampered by sharp socio-political tensions and strikes, especially in the economically marginalised regions, the mining sector and the public sector.
Ongoing large twin deficits, alleviated by international financial aid
The fiscal deficit could increase further in 2013, as fiscal slippages for electoral reasons (with impending general elections) cannot be ruled out. Public debt – already above the average for comparable emerging countries, as a ratio of GDP – is gradually increasing, but it is mostly contracted on concessional terms.
The external accounts will remain under pressure. Exports are likely to advance modestly due to the unfavourable economic situation in the EU, the country’s main trading partner, while imports are still suffering from high energy costs (making up 15% of the total). Meanwhile, expatriate remittances are likely to show some resilience but tourism could be hit by the political situation and overall, tourism should recover modestly.
2013 is likely to be marked by further worsening in the external debt ratios. However, since the 2011 G8 summit, Tunisia has received financial support from bi- and multilateral institutions to cover its public and external deficits. Loans from the World Bank and the African Development Bank, put in place for this purpose, are likely to be rolled over, as well as those from the EIB and the AFD. Moreover, a stand-by agreement of $1.8bn has been negotiated with the IMF. The transition government also wants to make use of Islamic donors and banks.
As long as the external trade imbalance cannot be fully offset by flows of financial aid and foreign direct investments, the authorities will have to continue drawing on foreign exchange reserves, which are now below the discomfort threshold (less than 3 months of imports).
Vulnerable banking sector and business environment
Bank solvency, asset quality and profitability, already mediocre before 2011, have worsened since. The risks linked to banking sector weakness could, then, undermine macroeconomic stability.
Due to the relatively recent nature of the government since the fall of the former regime and the resulting instability, the business environment is problematic, but improvements to the law on bankruptcy and the investment code are foreseen.
Meanwhile, Coface has noted an increase in payment incidents and a lengthening of debt collection.
