WASHINGTON — Tunisia’s economy is showing signs of revival after popular protests last year pushed it into recession, but the crisis in the eurozone, its most important export market, presents risks, a senior International Monetary Fund (IMF) official said on Friday.
The IMF has just completed its first review of Tunisia’s economy since the “Arab Spring” popular revolution in January 2011 toppled veteran leader Zine al-Abidine Ben Ali after almost 23 years in power.
In an interview, the IMF’s mission chief to Tunisia, Joel Toujas-Bernate, said the European debt crisis “is a big cloud” for Tunisia.
“We are seeing signs of improvements now — tourism is rebounding, foreign investment is also coming back, but the big uncertainty is the situation in Europe, which is the main trading partner and source of investment,” he said.
With constitutional changes in the works and prospects of a general election early next year, Tunisia’s political transition was “proceeding well”, Toujas-Bernate said.
A moderate Islamist party won elections held soon after the revolution and now leads a coalition government. The party’s leaders have sought to reassure investors and tourists, but successive protests and strikes organised by left-wing secular opponents have undermined efforts to restart the economy, which shrank 1,8% in 2011.
The IMF is forecasting the economy will grow somewhere between two to 3% this year, Toujas-Bernate said, emphasising that the outlook depended on the extent of the slowdown in the eurozone, which is Tunisia’s main source of investment and trade. Preliminary estimates Tunisia released this week show the economy grew 5% in the first quarter from a year ago.
“It isn’t completely clear yet, but we expect a rebound and macroeconomic policy will have to play an important role to support this recovery, especially budgetary policy,” he said. “There is a clear potential for higher growth over the medium-term based on the fundamental strengths of the Tunisian economy.”
Toujas-Bernate said the IMF supported efforts by the government to lift spending this year to help offset slower demand in the eurozone.
“Tunisia started with a fairly comfortable public debt position so they have some room” to increase spending, he said, adding that the fiscal stimulus would widen the 2012 deficit to 7% of gross domestic product.
“After this year, as the recovery takes hold, we see the need for gradual (budget) consolidation over the medium term,” he said. “We will see an increase and spike (in public debt) for a few years, but the authorities will be able to put public debt back on the downward trend once the economy rebounds.”
Toujas-Bernate said Tunisia had not requested IMF financing, but the global lender stands ready to help if needed.
“For this year they have identified all of the external financing they need so they haven’t called on us for financing, but we are ready to respond to any request by the authorities, especially if there is some deterioration in Europe,” he added.