Press Release: Statement by the IMF Mission on the 2007 Article IV Consultation with Tunisia

IMF News, June 6, 2007

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IMF mission headed by Mr. Abdelhak Senhadji in Tunis from May 14, 2007; statement issued May 28, 2007 at conclusion of the consultation.
Report to be discussed for approval by the Executive Board of the IMF in July 2007; preliminary conclusions and final report to be published on the IMF's website.
Mission held wide-ranging discussions with:
- His Excellency Mr. Baccar, Governor of the Central Bank of Tunisia;
- His Excellency Mr. Kechiche, Minister of Finance;
- His Excellency Mr. Jouini, Minister of Development and International Cooperation;
- His Excellency Mr. Zenaidi, Minister of Trade and Handicrafts;
- His Excellency Mr. Laroussi, Minister of Employment;
- His Excellency Mr. Chelbi, Minister of Industry, Energy, and SMEs;
- His Excellency Mr. Haddad, Minister of Tourism;
- His Excellency Mr. A Chaouch, Minister of Social Affairs.
Mission also met representatives of the banking sector, business community, and social partners.

Growth and inflation:
- Real GDP growth moved from 4 percent in 2005 to 5.4 percent in 2006.
- Inflation spiked in 2006 due to soaring international oil prices; monetary tightening in the second semester reduced inflation to 2.4 percent on average over the first four months of 2007.
External sector and debt:
- Current account deficit increased from 1.1 percent in 2005 to 2.3 percent in 2006, driven by rising oil prices.
- Excluding energy, the current account balance is near equilibrium.
- Balance of payments recorded a surplus, partly attributable to privatization receipts.
- Total external debt (including short-term debt) fell from 65.4 percent of GDP in 2005 to 59.1 percent of GDP in 2006, due in part to the use of privatization receipts.
Fiscal and financial sector:
- Budget deficit for 2006 is estimated at 2.9 percent of GDP, below the 3.6 percent projected in the Budget Law.
- Banking sector prudential indicators improved: nonperforming loans (NPLs) declined from 24 percent of total loans in 2003 to 19.2 percent in 2006.
External recognition:
- Davos Forum ranked Tunisia as the most competitive country in the region.
- Japanese agency R&I raised Tunisia sovereign rating from BBB+ to A- in 2007.

Growth and inflation projections:
- Growth in real GDP is expected to accelerate, reaching 6 percent in 2007.
- Inflation should be around 3 percent.
Fiscal and current account outlook:
- The budget balance and current account balance are not expected to change significantly in the short term.
Structural outlook:
- The short-term and medium-term outlook remains favorable.

Unemployment:
- Unemployment rate remains relatively high, particularly among young university graduates entering the active population in growing numbers.
- To reduce the unemployment rate below 10 percent, growth must increase significantly and be better geared toward creating more jobs for university graduates.
Growth and employment linkage:
- The XIth five-year plan aims to boost growth from 4¾ percent per year over the past decade to about 6.1 percent over the next five years.
- This anticipated growth acceleration is expected initially to stabilize or slightly reduce unemployment, before lowering it significantly during the subsequent five-year period.

Overall strategic objective:
- Move the Tunisian economy toward a knowledge-based, high-value-added economy.
Four key elements of the authorities' strategy:
- Strengthen Tunisia's macroeconomic position;
- Continue the gradual liberalization of the Tunisian economy;
- Stimulate private investment, particularly in high-value-added sectors;
- Pursue reforms, with particular attention to education and training systems.
IMF mission focus:
- Strengthening Tunisia's macroeconomic position and the necessary reforms to boost growth in the context of deeper integration into the world economy.

IMF Press Release: Statement by the IMF Mission on the 2007 Article IV Consultation with Tunisia (June 6, 2007).