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8  Results for Tunisia

Tunisia is small open economy with strong ties to Europe. Its economic picture is mixed. On the one hand, Tunisia has emerged has the sole “Arab Spring” country to have managed its political transition with some success, which in turn has sent a strong positive signal to the international community. On the other hand, insecurity and political instability have taken a heavy toll on the economy.

Several years of poor growth and deteriorating macro fundamentals have put the country into a fragile position to cope with the Covid-19 shock.

The policy room to manoeuvre is limited. In the short term, emergency liquidity provided by the IMF will help to alleviate macroeconomic pressure. But the structurally weak external position means that a new IMF loan program will be necessary, which will come with difficult conditions. In particular, fiscal consolidation will emerge as a top priority. Public debt should reach more than 80% of GDP at end-2020. In the meantime, the fragmented political landscape questions the ability of the government to push ahead with reforms. Despite a well-educated labour force and a relatively diversified manufacturing base, reviving the economy will likely prove to be challenging. However, as long as Tunisia continues to benefit from donor support, the macroeconomic situation should remain sustainable.

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