Tunisia Economic Outlook
GDP grew 1.6% year on year in Q4 (Q3: 2.9%), meaning it expanded 2.5% over 2022 as a whole—the fourth-worst performance in MENA. Turning to Q1 2023, available data is downbeat. Inflation rose to highs not seen since 1984, likely knocking private spending; imports—which rise when consumers spend more—grew just 1.6%, the least since Q4 2020. The external sector also seemed weak, with exports growing the least since Q4 2020. In other news, on 3 May the IMF said it was “almost” done lining up funds for its long-delayed USD 1.9 billion rescue package. On the day the comments were made, Tunisian bonds were the best performing among emerging markets. The IMF’s comments came despite the President saying that he would not consider further spending cuts and against the background of a growing migrant crisis and a crackdown on political dissent.
Inflation fell marginally to 10.3% in March from February’s near 40-year high of 10.4%. Inflation should ease by the end of this year on a tougher base effect, but it will likely remain above the 10-year pre-pandemic average amid a weaker dinar and cuts to subsidies. Monetary financing poses an upside risk, while commodity prices are a key factor to watch.