AfDB lowers its growth forecasts to 2.5% in 2022 and 3.2% in 2023

Tunisia: AfDB cuts its growth forecasts to 2.5% in 2022 and 3.2% in 2023

The African Development Bank (AfDB) has just released its North Africa Economic Outlook 2022. The report notes that macroeconomic fundamentals have improved in the wake of the Covid-19 pandemic in this region, but performance varies by country. Thus, and to stimulate the revival of growth, the governments of North Africa have maintained expansionary budgetary and monetary policies.

It shows that the financial institution expects GDP growth in Tunisia of 2.5% in 2022 (down 0.7% from its previous forecasts) and 3.2% in 2023 (down 0.3 % compared to its previous forecasts) under the impact of the revival of tourism and industrial sectors.

However, this recovery in economic activity is not robust enough to recover the jobs that have been lost since the start of the Covid-19 pandemic. A joint study by the AfDB and the Arab Institute of Business Leaders (IACE) conducted in 2022 shows that the economy has lost 130,000 jobs due to the pandemic.

The projections show that it is necessary to improve the business climate and stimulate competition in order to speed up the recovery of private investment. Restoration of fiscal sustainability, prudent debt management and the availability of essential food at affordable prices for vulnerable populations will be necessary to mitigate risks. ”, advise the authors of the report.

In the same document it is stated that ” Tunisia’s budget for fiscal year 2022 projected an average oil price of $75 per barrel. barrel, which instead exceeded $100 on March 15, 2022, after reaching $130 on March 8, 2022. increase in commodity prices, the latest estimates point to approx. $2.3 billion in additional grants under the FY2022 budget, of which $439 million is earmarked for food. In the longer term, the implementation of bold reforms is necessary to ensure the sustainability of public spending. In countries where the energy sector is still heavily subsidized (Algeria, Libya and Tunisia), higher costs will weigh on national budget expenditures “.

For the AfDB, the current account deficit is expected to widen to 9.6% in 2022 due to the slowdown in European demand and tourism, and to around 7% in 2023. This worsening of the current account deficit is mitigated by the recovery in exports of manufactured goods and operation of a gas field, which should make it possible to reduce energy imports.

Another important thing, public debt was estimated at 82.4% of GDP in 2021, more than two-thirds of which was external debt. External debt servicing over the next three years is expected to amount to around USD 9 billion, equivalent to twelve times the amount of the country’s SDR allocation, which will place a significant burden on the state budget and external reserves.

As for 2021, the bank states that the budget deficit was estimated at 8.1% of GDP, which is an improvement over 9.2% of GDP in 2020. Despite the good growth in budget revenues of +13%, the mass wage, fuel subsidy and debt servicing up in the budget.

Thus, Tunisia has had to tap into the domestic financial market to meet its significant financing needs in 2021 following the downgrade of its sovereign rating and its limited access to external financing. However, inflation rose slightly from 5.6% in 2020 to 5.7% in 2021 due to price regulation on food, tobacco, transport etc.

In turn, the current account deficit widened from 6.1% in 2020 to 7.1% of GDP in 2021, exacerbated by the rising bill for imports of food and energy products, while remittances remained an important part of GDP: the however, recorded a decrease (-4.2% between 2020 and 2021). Unemployment reached 18.4% in the third quarter of 2021, one point higher than at the beginning of the year. The situation is more complex for women (unemployment rate of 24.1%) and people with a high school diploma (30% unemployed). The poverty rate is 15.3% and mainly concerns rural areas. Most poor families, whose number is estimated at around 900,000 people according to the national poverty register, benefit from subsidy programs and monthly support of 180 dinars (54 euros) per child. family. The recent crisis has enabled them to obtain additional financial support.

And to note that during the period 2015-21, public debt as a percentage of GDP increased significantly in Tunisia from 58.5% to 82%.

The African Development Bank recommends to countries in the region certain medium and long-term policies for strong, sustainable and inclusive growth, including: investment in agricultural productivity and food security; gradually reduce dependence on hydrocarbons by continuously investing in renewable energy capacity; reform inefficient fossil fuel subsidies; removing barriers to further support investment in renewable energy; and mobilizing climate finance in North Africa and facilitating climate action.

IN

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