st
Eco Emerging // 1 quarter 2021
economic-research.bnpparibas.com
2
6
EXTERNAL ACCOUNTS: A PRECARIOUS STABILITY
MONETARY ENVIRONMENT
Tunisia has so far been able to absorb the external shock thanks to a
significant fall in imports due to the contraction in economic activity
and lower oil prices. Despite the collapse in tourism receipts and a
downturn in manufacturing exports, the current account deficit has
narrowed, FX reserves have been rebuilt and the dinar has remained
stable against the euro, appreciating thus slightly against the US dollar.
With FX reserves of USD 8.2 bn and external financing needs estimated
at a little over USD 6 bn in 2021 (including the EUR 1 bn Eurobond in
%
TND/Euro
Policy rate (RHS)
Inflation (RHS)
4
.0
.5
8
7
6
5
4
3
2
1
3
3.0
2
tranches with an American guarantee), there is still a low risk of an
imminent government default on its international bonds.
2.5
Yet the situation is fragile. Even though the current account deficit has
narrowed, it remains high at about 7-8% of GDP. Meanwhile the spread
of the pandemic continues to strain the main sectors that generate
foreign currency. Moreover, as slow as it may be, the expected rebound
in the Tunisian economy will fuel greater demand for imports. Foreign
direct investment will also come under downward pressure and is
unlikely to exceed 2% of GDP this year. This covers less than 25% of the
expected current account deficit. Consequently, there is a significant
2.0
1
.5
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
SOURCE: NATIONAL STATISTICAL OFFICE, CENTRAL BANK
CHART 2
gap to close, which could place new pressure on external liquidity the quality of bank loan portfolios was already deteriorated before the
and the dinar if international donors fail to provide sufficient financial crisis, especially among state-owned banks (one third of the banking
assistance. Persistent external imbalances will also continue to drive system). The moratorium on loan payments has so far helped limit the
up the external debt, which could approach 110% of GDP by year-end impact of the Covid-19 shock. Yet pressures on the banking system
2
021, an increasingly unsustainable debt level.
are bound to intensify due to its high exposure to the most vulnerable
sectors (manufacturing accounted for 23% of loans outstanding at
year-end 2019; commerce, 16.7%; and tourism, 4.8%).
ECONOMIC GROWTH: PROBABLY A LASTING IMPACT
The expected rebound in economic growth in 2021 remains hypothetical
The capacity of the economy to rebound is highly uncertain. The
year 2020 already got off to a bad start with real GDP declining by
(
forecasted at 4% after a recession estimated at 8.5% in 2020). Even if
this is confirmed, real GDP would be still 4.8% below the 2019 level.
The epidemic’s shock could have a lasting impact because it slams
an economy already weakened by a decade of sluggish growth (1.6%
on average between 2011 and 2019). This has been the consequence
of a declining trend in private-sector investment (from an average of
2
% year-on-year in Q1. Economic activity abruptly contracted by 21%
in Q2 under the combined impact of strict lockdown measures, the
collapse of the tourism sector, and the decline in European demand
(
75% of Tunisian exports). Despite the Q3 recovery, especially in the
manufacturing sector, Tunisia reported one of the region’s most severe
recessions, with GDP contracting 9.6% on average in the first nine
months of the year. The resurgence of the pandemic, both locally
1
7.5% of GDP in 2000-2010 to 15.2% in 2011-2019) and the steady
deterioration of fundamentals. In particular, the need to consolidate
public finances means that new sources of economic growth will have
to be found in order to reduce the unemployment rate, which has now
reached 16.2%.
(
with between 1,000 and 1,500 new cases each day since mid-October,
compared to fewer than 50 cases during the first wave) and among its
main trading partners, is also threatening the economy again. Major
efforts have been deployed to secure vaccine supplies, thanks notably
to the World Health Organization’s Covax initiative. Yet the vaccination
campaign will not start up before early Q2.
Completed on 18 January 2021
Stéphane ALBY
stephane.albyc@bnpparibas.com
In the meantime, the government has virtually no fiscal manoeuvring
room. Capital expenditure barely exceeds 3% of GDP in the 2021
finance bill, more than 2 points less than in 2019. CAPEX is likely to act
as an adjustment variable in case of renewed pressure on Treasury’s
liquidity. In comparison, the total wage bill for public-sector employees
is projected at 16.6% of GDP this year.
Monetary policy is also constrained. The continued decline in the
inflation rate, in part due to the strong dinar, has certainly allowed
the central bank to lower its key rate by 150 basis points to 6.25% (see
chart 2). Yet its approach remains cautious, and real interest rates are
still positive. Moreover, monetary easing will only marginally improve
the poor health of the banking sector. With a non-performing loan
ratio of 14% at year-end 2019 (of which provisions cover only 55%),
The bank
for a changing
world