## IMF Survey: Tunisia Weathers Crisis Well, But Unemployment Persists

_IMF News, September 10, 2010_

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## Bibliographic details
- Authors: Joël Toujas-Bernate, Rina Bhattacharya IMF Middle East, Central Asia Department September
- Published: September 10, 2010

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### Overview
- Tunisia’s economy fared relatively well during the global crisis, but the key challenge is to boost job-generating growth and lower unemployment.
- IMF assessment date: September 10, 2010.

### Economic performance and short-term risks
- Growth expected to reach 3.8 percent in 2010, after slowing to 3 percent in 2009.
- Tunisia’s recovery is fragile due to high dependence on Europe:
  - Projected growth in Tunisia’s main trading partners: 1.2 percent in 2010 and 1.5 percent in 2011.
- External risks and recent developments noted:
  - Potential inflationary pressures.
  - Recent deterioration of the current account balance.
  - Declining external reserves.
- Fiscal policy leeway exists due to prior prudent macroeconomic management, but authorities must remain vigilant.

### Labor market and medium-term growth objectives
- Unemployment dynamics:
  - Unemployment had fallen to 12.4 percent in 2007 and was at 13.3 percent at the time of the assessment, remaining relatively high, particularly among the educated youth.
- Growth projection conditional on reforms:
  - “Tunisia’s growth could increase gradually and reach an average of about 5 percent over 2010-14,” provided planned policies and reforms succeed.
- Strategies to boost employment-generating growth:
  - Export promotion strategy to diversify target markets and products.
  - Trade agreements and negotiations:
    - Preferential trade agreement with the West African Economic and Monetary Union.
    - Negotiations with the Central African Economic and Monetary Community for free trade agreements.
    - Bilateral negotiations with the European Union to extend the Association agreement to services, agricultural products, and processed food (current agreement provides for free trade for industrial products).
  - Reforms to labor market policies, the educational system, and public employment services to facilitate labor mobility and reduce mismatches between labor supply and demand.
  - Implementation support from several World Bank Development Policy Loans.

### Strengthening macroeconomic and fiscal resilience
- Expenditure control and social security reform emphasized as essential to maintain a stable macroeconomic environment that promotes employment and growth.
- Pension reform discussions with social partners to improve pension system financial sustainability.
- Government advised to explore ways to contain subsidies on food and fuel products.

### Tax and financial sector reforms
- Tax regime reforms:
  - International comparisons show a relatively high tax burden on businesses in Tunisia and scope to increase yield from consumption taxes.
  - Authorities intend to reduce tax rates on businesses and offset reductions by increasing the standard VAT rate and expanding the tax base through the elimination of exemptions.
- Financial sector strengthening measures:
  - Consolidating the financial strength of banks.
  - Enhancing the role of banks in the economy.
  - Restructuring the public banking system.
  - Bolstering the presence of Tunisian banks abroad.
  - Ultimate aim: transform Tunisia into a banking services hub and a regional financial market.

### Monetary framework and capital account plans
- Authorities intend to modernize the monetary policy framework by introducing inflation targeting.
- Plans to implement convertibility of the dinar and capital account liberalization by 2014.
- IMF assessment: achieving these goals requires significant preparatory work, including:
  - Further strengthening of the banking system.
  - Deepening of the foreign exchange, money, and capital markets.
  - Additional steps to ensure increased reliance on interest rates as the operational target of monetary policy.

### Key statistics and projections
- Growth: 3 percent in 2009; 3.8 percent in 2010.
- Projected average growth: about 5 percent over 2010-14 (conditional).
- Trading partners’ projected growth: 1.2 percent in 2010; 1.5 percent in 2011.
- Unemployment: 12.4 percent in 2007; 13.3 percent at assessment.
- Target year for dinar convertibility and capital account liberalization: 2014.

*Source: IMF Survey: Tunisia Weathers Crisis Well, But Unemployment Persists (September 10, 2010).*

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## Content in this bundle

- [Car091010afpdf (PDF)](/-/media/websites/imf/imported/external/french/pubs/ft/survey/so/2010/car091010afpdf.pdf){rel="external" type="application/pdf"}

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [IMF Country Focus](https://www.imf.org/en/news/country-focus)
- [Read the report](https://www.imf.org/external/pubs/cat/longres.cfm?sk=24195.0)
- [Tunisia: Selected issues](https://www.imf.org/external/pubs/cat/longres.cfm?sk=23835.0)
- [Tunisia and the IMF](https://www.imf.org/external/country/TUN/index.htm)
- [Policy effectiveness in MENA](https://www.imf.org/external/pubs/cat/longres.cfm?sk=23842.0)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/socar091010a_