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Tunisia Economy 2014: Recent Developments and Prospects

Wednesday, September 03, 2014 > 08:45:59
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(AfriBiz)

Tunisia is an emerging economy. Its production structure (Table 2) is dominated by services (59.4% of GDP) and industry (31.2%). The weight of agriculture is limited (9.4% of GDP), but it maintains an important role in the Tunisian economy’s global performance given the export share of processed agricultural products, notably olive oil, in foreign trade (10.5%).

In 2013, the manufacturing sector registered average growth of 2.5%. The growth was led mainly by the textile (+3.7%), engineering and electrical sectors, which are strongly export oriented, as well as by the good performance by the chemical industries (+4.2%). Nonetheless, the competitiveness of the Tunisian industrial sector remains weak and dependent on the exchange rate of the Tunisian dinar (TND). The expected 2014 upturn in the euro area should support a recovery in the manufacturing sector, particularly in offshore manufacturing.

Non-manufacturing sectors registered growth of only 2% as a result of a downturn in value added in the oil and gas sector (-1%) and a decline of 36% in fees on the Tunisian portion of the pipeline transporting Algerian gas to Italy. The mining sector, in contrast, registered strong growth climate. But phosphate production is not expected to surpass an estimated 3.8 million tons in 2013, down from a production capacity of 8.1 million tons in 2010. Still, according to Industry Ministry projections, production should reach 6 million tons in 2014, and increase to 8 million tons in 2016 and 10 million tons in 2018, thanks to the start of operations at new deposits.

Massive hiring (70% increase in personnel from 2011-13) affected the cost per ton of Tunisian phosphate. Global competition sharpened with the arrival of new producers, which is also likely to weigh on the competitiveness of Tunisian phosphate, the price of which has risen to USD 70 per ton from USD 30. In the hydrocarbons sector, exports decreased by 3.2% in 2013 compared to 2012 despite a resumption of production. An expected revision in 2014 of energy subsidies received by large consumers of electricity, as part of fiscal consolidation, could affect the competitiveness of Tunisian industrialists.

The value added of trade services grew by 4.1% in 2013. The sector’s vitality was led by telecommunications (+9.7%), financial services (+5%) and transport (+3.8%). The services sector could be called upon to play a more important role in the Tunisian economy in 2014 and 2015 if: i) the tourism sector overcomes difficulties linked to the decline in quality of hotel infrastructure and the burden of debt contracted under the former government; ii) larger investments are oriented toward the information technology and communications sector. Meanwhile an expansionary fiscal policy adopted to re-launch the economy led to rapid growth in value added in non-market services for the third year in a row (+3.5% in real terms), increasing their share of GDP to 18%.

Consumption remained an essential engine of growth in Tunisia in 2013 (+2.4%) thanks to massive hiring and a rise in salaries in the public sector. This trend is likely to continue in 2014, but with a rebalancing of public and private consumption. The government administration is likely to freeze hiring and rein in the wage bill, while the resumption of investment should bring a rise in private employment. The contribution of investment to real growth should increase to 1.6% in 2014 from 0.4% in 2013. Growth should also be spurred over the next few years by the implementation of structural reforms driven by the International Monetary Fund (IMF), technical and financial partners, and the Tunisian authorities.


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